UPDATE: The House passed a bill that would delay BOI reporting for existing entities until 2026. This does not delay the required reporting for NEW entities. The bill is now in the Senate. We'll keep you posted!
Every business owner needs to understand and know about the NEW MANDATORY Beneficial Ownership Information (BOI) Reporting requirements are for business entities in the US.
BOI Reporting goes into effect on January 1, 2024.
Note that FinCEN is not accepting any filings before January 1, 2024.
What is BOI?
The mandatory reporting of all Beneficial Owners to the U.S. Treasury's Department of Financial Crimes Enforcement Network (FinCEN).
This is not the IRS, but the same department in which foreign bank accounts are reported.
This big brother effort is being justified as part of the federal government's anti-money laundering and anti-tax evasion efforts, giving them the ability to look beyond shell companies that are setup to hide money.
But this affects almost all small business owners! See exceptions below.
Who is a Beneficial Owner?
Beneficial Owners of an entity are individuals either of the following:
- Directly or indirectly own more than 25% of the entity
- Exercises control over the company (even if they don't have ownership interest)
There is no limit to the number of beneficial owners an entity may have.
The following are exceptions and not beneficial owners:
- A minor child
- An employee without ownership and not a senior officer
- An individual with a future interest in ownership
- A creditor
- An individual acting as a nominee, intermediary, custodian, or agent
What is reported for Beneficial Owners?
The following information will be required to be reported for all Beneficial Owners:
- Legal name
- Residence address
- Date of birth
- ID from a non-expired passport, driver's license, or state identification card
- Upload or image of identification provided
What is reported for the entity?
The entity itself must also include the following information in the filing.
- Full legal name and any DBAs/FBNs
- Current address
- The state in which it was formed
- Tax ID / EIN
CHANGE of information - requires new filing
If this was just a once-a-year filing, the admin would be manageable. BUT, if any of the information reported for any beneficial owner changes (i.e. Driver's License or passport expires, change of address, etc), a new report must be filed within 30 days or be subject to penalties.
So, start making your list and expiration dates of all Identification documents.
Deadlines to file
New entities formed January 1, 2024 or later will file and report on BOI within 30 days of the entity's formation. Note: there is a proposal to extend this initial filing to 90 days.
Existing entities formed before January 1, 2024 must file these reports by January 1, 2025.
Penalties
Penalties will be steep for non-compliance. Willfully failing to comply may result in the following:
- A $500/day civil penalty; and
- Criminal penalties of up to $10,000 and/or imprisonment of up to 2 years.
... and there is NO CAP on the $500 per day civil penalty
The penalty can be imposed on the entity and ANY person who either causes the failure to file or is a senior office of the entity at the time of failure to file.
Safe Harbor - 90 day window to correct
Penalties will not be imposed if a person or entity voluntarily submits a report to correct inaccurate information within 90 day so the deadline for the original report.
What entities are subject to BOI reporting?
In general, the vast majority of small and medium-sized businesses that form with a state's Secretary of State office will be subject to FinCEN's BOI reporting.
Exemptions include the following:
- Public accounting firms
- Large operating companies with at least 20 full-time U.S. employees and U.S. gross receipts or sales of more than $5 million.
- Inactive entities
- Security dealers or brokers
- Investment companies and advisors already registered with the SEC
- Venture capital fund advisors
- Commodity Exchange Act registered entities
- Insurance companies and state-licensed providers
- Tax-exempt organizations
- SEC reporting issuers
- Government entities
- Banks and credit unions
- Public Utilities
Where do I file my BOI report?
>>>> FINCEN: https://fincen.gov/boi
Resources:
- FinCEN Frequently Asked Questions on BOI
- Where to file your BOI report
- Latest guidance, regulations and new on BOI
