The BOI Reporting Business Trap

Compliance requirement starting Dec. 31, 2024

The Corporate Transparency Act created a new beneficial ownership information (BOI) reporting requirement for many businesses. The new reports are intended to help law enforcement combat money laundering and terrorism by ensuring companies disclose their owners. 

Many CPAs and tax preparers do not include this report in their clients’ annual tax filings because the report is filed with FinCEN rather than the IRS.

This article discusses the reporting requirements, deadlines, and exemptions associated with BOI reporting.

Who Must File?

Entities must file a BOI report if they meet the definition of a “reporting company” and are not exempt. These entities include corporations, LLCs, or other entities created by filing documents with a Secretary of State or any U.S. state or a similar office.

Exemptions from Reporting

There are currently 23 exemptions. Exempt entities in usually in heavily regulated industries, such as banks, credit unions, large operating companies, insurance firms, 501(c) nonprofits, and investment companies. Additionally, inactive entities may also be exempt.

Who is a Beneficial Owner?

If your company qualifies as a reporting company, you must identify its beneficial owners. A beneficial owner is defined as anyone who either:

  • Exercises substantial control over the company, or
  • Owns or controls at least 25% of the company’s ownership interests.

Substantial Control includes senior officers and individuals who can make significant decisions in the company, appoint or remove directors, or can make significant decisions on behalf of the company. 

This is important because even non-owners may need to be included in the BOI reporting due to their position.

Ownership Interests include equity, stock, voting rights, capital interests, and other forms of ownership.

Information Required in the BOI Report

Reporting companies must provide information about both the company and its beneficial owners.

Company Information:

  • Full legal name
  • Trade names (if any)
  • Current street address
  • Jurisdiction of formation or registration
  • Taxpayer Identification Number

Owner Information:

  • Full legal name
  • Date of birth
  • Current residential address
  • Identifying number from a government-issued ID (such as a driver’s license or passport)
  • An image of the government-issued ID

Filing Deadlines

To add an extra layer of confusion, there are 3 different filing deadlines depending on when the entity was formed.

  • Companies formed before January 1, 2024, must file a BOI report before December 31, 2024. 
  • For companies formed after January 1, 2024, the report is due within 90 days of formation. 
  • For those created after January 1, 2025, the report is due within 30 days.

Consequences for Non-Compliance

Failure to timely file a BOI report can result in severe penalties. 

Willful non-compliance may lead to civil fines of up to $500 per day, and criminal penalties include imprisonment of up to two years and fines of up to $10,000. 

Additionally, senior officers of a non-compliant company may be held responsible.

FinCEN Identifier

Individuals and companies can request a unique identifier from FinCEN which can be used instead of personal information in future BOI reports. FinCEN identifiers are highly recommended for those with interests in multiple businesses.

Conclusion

BOI reporting represents a blind spot for many businesses.

While the reporting process can be straightforward for some smaller businesses, more complex ownership structures may represent a challenge.

Business owners should evaluate the BOI requirements and prepare to file the necessary reports in 2024. 

Failure to comply can result in significant penalties. 

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