O wning and running a business requires a host of specific skill sets, ranging from strategic planning to navigating regulations. Beneficial ownership information reporting (BOIR) introduces new rules that can be challenging to navigate, but understanding the requirements and deadlines is critical for compliance. This federal regulation, effective January 2024, impacts most U.S. businesses. Wondering if you need to file a BOIR form? The following overview provides essential information about BOIR filing, including what it is, why it’s required, who needs to file, the consequences of not filing, and how to navigate the filing process.
BOIR 101: Understanding the Basics
BOIR is the process of filing a report with the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury. This report identifies the individuals who ultimately own or control your business—the “beneficial owners.”
Think of it as shedding light on the actual ownership structure behind a company. The form specifies information that includes the beneficial owners’:
- Names
- Addresses
- Social Security numbers/taxpayer identification numbers (TINs)
- Dates of birth
It also provides details about their ownership and control percentages in the business.
Who Is Considered a Beneficial Owner?
Individuals qualify as beneficial owners if they have significant ownership or control of the company, either directly or indirectly. This could include:
- Owning at least 25% of the company’s shares
- Having substantial control over its decisions or operations
- Holding a senior officer position (e.g., President, CEO)
- Having the authority to appoint or remove key personnel
- Making critical decisions regarding the company’s business, finances, or structure
In essence, beneficial ownership goes beyond just holding shares and encompasses a broader level of influence within the company.
Importance of BOIR Reporting
The Corporate Transparency Act (CTA) of 2021, aimed at increasing transparency in business ownership, brought about the requirement for BOIR filing. By knowing who controls companies, law enforcement and authorized parties can more effectively identify and investigate suspicious activity and combat financial crimes like money laundering and terrorist financing. BOIR filing also fosters a level playing field in the business world by ensuring that all companies adhere to the same standards of transparency and integrity.
BOIR is the process of filing a report with the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury.
Who Needs to File a Beneficial Ownership Information Report?
Not every business needs to file a BOIR report. The CTA defines a category of businesses as reporting companies. These are generally privately held entities registered to do business in the United States. Common business structures like limited liability companies (LLCs) and corporations are likely considered reporting companies. However, there are some exceptions. Publicly traded companies, certain inactive businesses, and some specific types of entities, like registered investment companies and certain trusts, are exempt from filing.
BOIR Filing Deadlines
The deadline for filing your BOIR report depends on when your business was formed:
- Existing businesses (formed before January 1, 2024): The filing deadline is January 1, 2025.
- Businesses formed between January 1, 2024, and January 1, 2025: You have 90 days from your formation date to file.
- Businesses formed after January 1, 2025: The deadline is 30 days after business formation.
Not filing or filing late can lead to civil penalties from FinCEN. Non-compliance may also raise red flags and hinder your future business endeavors.
Streamlining the Process: How to File a BOIR Report
FinCEN offers a user-friendly BOI e-filing system for electronic report submission. While obtaining a FinCEN ID is not mandatory, it can streamline the process by pre-populating some of your information. Here’s an overview of the steps involved:
- Gather required information. You’ll need details about your beneficial owners, including their personal information and ownership percentages. You’ll also need to provide your entity’s legal name and trademarks, current U.S. address, and taxpayer identification number.
- Create an account (optional with FinCEN ID). A FinCEN ID allows you to easily create an account within the BOI e-filing system.
- Enter information electronically. The system will guide you through the process of entering all the required information about your business and its beneficial owners.
- Submit the report. Once you’ve reviewed and confirmed the accuracy of your information, submit the report electronically.
- Receive confirmation. After submitting the report, you will receive a confirmation of successful submission. Keeping records of the submitted beneficial ownership information for future reference or audits is essential.
By following these steps and keeping good records, you can ensure a smooth and compliant BOIR filing experience.
The Advantages of BOIR Reporting
Complying with BOIR regulations is essential. But the benefits of doing so extend far beyond avoiding penalties. These include:
- Enhanced reputation. Transparency fosters trust with potential customers, investors, and partners. Committing to ethical practices and clear ownership structures can project a more reliable and trustworthy image.
- Streamlined business relationships. BOIR reporting can simplify onboarding new vendors or partners. Having readily available beneficial ownership information eliminates the need for lengthy due diligence processes.
- Reduced risk of fraud. By deterring those seeking to hide their involvement in a business for illicit purposes, BOIR reporting can create a less-hospitable environment for fraudulent activity. This translates to a safer business environment for everyone.
- Improved access to capital. Financial institutions view businesses with clear ownership structures more favorably when considering loan applications or investment opportunities. BOIR compliance can open doors to new funding avenues.
BOIR reporting isn’t just a regulatory hurdle; it’s an opportunity to strengthen your business reputation, streamline operations, and potentially unlock new growth opportunities.
Can You File a BOIR Report Yourself?
Though many businesses may opt to file their own BOIR forms, it is not recommended. Instead, consult a knowledgeable advisor, such as an attorney or an accountant, when filing the initial and any subsequent BOIR reports to ensure they’re completed on time and to FinCEN’s standards.
Adapting to Changes in BOIR Reporting
As BOIR reporting is a new regulation, anticipate ongoing changes and updates due to its evolving nature. Staying informed is key. FinCEN’s website is a valuable resource, offering filing instructions and the latest updates on BOIR requirements. Revisit the website periodically to stay informed and updated with any changes.
Stay Compliant and Stay Informed
Ensuring you file your report and stay updated on changes is crucial for maintaining transparent and compliant business operations. While this guide provides a comprehensive overview of BOIR filing, there’s no substitute for personalized advice. Consult a legal or financial advisor for questions about your business and its BOIR filing requirements. They can further examine your situation and provide tailored guidance for navigating the process.
Disclaimer: Bizee and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
