Have you heard of the Beneficial Ownership Information (BOI) filing requirements? Most companies have not even though this new federal regulation represents one of the most significant changes in business reporting requirements in recent years. We expect it to have an impact on many startups and small businesses. Now is the time to make sure you’re in compliance to avoid hefty fines.
What are the Beneficial Ownership Information filing requirements?
The BOI filing requirements went into effect January 1, 2024, under the Corporate Transparency Act (CTA). It requires businesses to submit beneficial ownership reporting to the U.S. Financial Crimes Enforcement Network (FinCEN). Beneficial owners are the individuals who ultimately control or profit from a company.
The goal of this regulation is to prevent the use of anonymous shell companies for illegal activities. This can include tax evasion, money laundering, and financing terrorism. Requiring businesses to disclose their beneficial owners will strengthen transparency and accountability within the U.S. financial system.
Legal Requirements
It’s important to note that BOI filings are a legal matter. Escalon does not offer BOI filing services. However, we’re committed to keeping our clients informed about regulations like this so you can take the necessary steps with the right professionals.
This blog provides a general overview of the BOI filing requirements for your information. Our experts can connect you with a legal advisor if you need filing assistance.
Who Needs to File?
The BOI filing requirements apply to a wide range of startups and small businesses, including corporations, limited liability companies (LLCs), and other similar entities created or registered in the U.S. Because of the legal complexity of this regulation, it’s crucial to seek advice from a lawyer who can help you determine if your business is required to file. The beneficial ownership reporting requirements are nuanced and depend on factors such as ownership structure and business activity.
What Must Be Reported on the Beneficial Ownership Information Filing?
For businesses that need to file, the report will disclose key information about the company and its beneficial owners. This includes:
- Name, birth date, and address of each beneficial owner
- A government-issued ID number (such as a driver’s license or passport)
- Details of the company itself, including its legal name and formation details
Again, your attorney can guide you through the specifics and ensure you provide accurate information to comply with the new regulations.
When to File?
Existing companies have until January 1, 2025, to submit their initial BOI reports. This deadline is fast-approaching, and many businesses are unaware of these requirements. New companies formed after January 1, 2024, must file within 30 days of formation.
What are the Penalties?
Non-compliance with the BOI filing requirements can lead to serious consequences. Civil penalties for failing to file can reach up to $500 per day. Over time, this can result in substantial fines, especially for businesses unaware of the new rules. Intentionally providing false or incomplete information can lead to additional fines and criminal penalties.
Impact of Non-Compliance with the Beneficial Ownership Information Filing Requirements
It’s not just the financial implications businesses need to consider. Companies that fail to file, file incorrectly, or provide false information may face long-term impacts on their credibility with authorities, customers, and investors.
Non-compliance could also affect a business’s ability to engage in important transactions. Companies are often required to be in good standing with regulatory bodies for mergers and acquisitions or financing rounds.
With proper legal guidance, you can ensure your business is complying and avoid these risks. Escalon can connect you with legal professionals who specialize in this area if you need assistance understanding how this regulation applies to your business.
Comparison to Other Filing Requirements
The new BOI filing is one of many compliance requirements companies must meet, but it stands out for its focus on ownership and control. Unlike tax filings, which report financial activities, BOI filings require personal details on those who own or control the business. This adds a new layer of compliance for many startups and small businesses that may not have previously needed to report ownership details.
For companies already familiar with regulatory reporting, such as filing with the SEC or adhering to anti-money laundering regulations, beneficial ownership reporting will feel similar. However, because the new rules apply to a much wider range of entities, many businesses may need to adjust their current compliance processes to incorporate BOI reporting.
Your Trusted Business Advisor
We recommend starting conversations with your legal advisor now to determine if your business must comply and to gather the necessary information for reporting. Our experts can connect you with specialized legal advisors to help keep you compliant with the Beneficial Ownership Information filing requirements. Contact us today for a referral.
Escalon Services is not a law firm and cannot provide legal advice, including providing advice as to whether any specific entity will be required to file a report. Escalon cannot provide its own interpretation of the statute or FinCEN’s final report ruling; however, many of the questions can be answered by referring to the text of the final rule, sections of which have been provided where appropriate. You can also direct questions to FinCEN. The phone number of the FinCEN Regulatory Support Section is (800) 767-2825. You can also email them at frc@fincen.gov.
