Beneficial Ownership Information Reporting and How It Impacts YouDec 13, 2023
You may have already heard about it, or it might be completely new to you, but there's an important development in the corporate regulatory environment that deserves your attention. It's the new Beneficial Ownership Information Reporting requirement, introduced under the Corporate Transparency Act. Whether you're already in the know or just encountering this for the first time, our goal is to provide you with a comprehensive guide that demystifies these changes and helps you navigate the new requirements with confidence and ease.
To file your BOI Report click HERE to get started.
For BOI Frequently Asked Questions click HERE.
For our video on how to file your report click HERE.
Understanding Beneficial Ownership
Firstly, let's talk about beneficial ownership information. This term is key under the new regulations. It refers to identifying who really owns or controls your company. The main goal here is to peel back the layers of corporate structure to reveal the individuals ultimately in charge. The U.S. Department of the Treasury now requires this information to prevent the misuse of shell companies and to enhance overall transparency in the business world. Per the FINCEN website "A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests."
Reporting: Who, When, and How
As of January 1, 2024, your business will be required to report this beneficial ownership information. You will have until January 1, 2025 to complete the report. If you create a company between January 1, 2024 and January 1, 2025 you will have 90 days to file the report. This might sound daunting, but there are no fees for the process and it should be relatively straightforward. The reporting will be done electronically through FinCEN's website, which is still under development. While the process might seem complex, most businesses will be able to handle it without professional help. However, our team is always here to assist if you need it.
Who Needs to Report?
This new rule applies to both domestic and foreign companies (think LLC's, S Corps, C Corps) operating in the U.S., with a few exceptions. For instance, publicly traded companies, nonprofits, and certain large operating companies are exempt from these requirements. This does not apply to sole proprietorships.
It's important to remember that this is just an overview. FinCEN will be releasing more detailed guidelines on various aspects of the Act, including definitions, reporting specifics, and procedures for updating or correcting reports. Also, once the report has been filed, it appears that it will only need to be updated when changes occur. We'll make sure to keep you informed of these updates as they become available.
An Important Note on Penalties
If you have seen any discussions surrounding the new BOI reporting you have likely seen reference to the penalties for not filing or updating the reports to the tune of $500 per day, two years imprisonment and fines of up to $10,000. It is important to note that these refer to those who "willfully" fail to file and update the reports. In our opinion, this is not referring to those that are not initially unaware of a filing requirement or who forget to make an update when there is an ownership change. This is likely referring to those that are trying to intentionally hide information regarding the ownership of the company.
Compliance is Key
Finally, it's crucial to underline the importance of complying with these new regulations. While the reporting process begins in 2024, now is the time to start preparing. Understanding who qualifies as a beneficial owner in your company and gathering the necessary information will be key steps in this process.
If you have additional questions you can see a comprehensive list of FAQs on FINCEN's website here.
Our firm is dedicated to helping you through these changes. We will continue to provide updates and guidance on how to stay compliant. If you have any questions or need assistance with the reporting process, feel free to reach out to us.