Demystifying BOI: Guide to Beneficial Ownership Information Reporting

Many small business owners may feel overwhelmed at the thought of yet another reporting requirement. However, BOI, or beneficial ownership reporting – the process of providing the government with information about who owns a business – is an essential step in preventing fraudulent businesses from laundering, hiding, and stealing money.

The Treasury's Role

Unlike traditional tax reporting handled by the IRS, BOI reporting falls under the jurisdiction of the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN's primary aim is to identify and combat financial crimes, such as racketeering and money laundering. While those in the financial services space are familiar with the agency, many small business owners may be unfamiliar with FinCEN and its reporting requirements. 

Compliance and Reporting Obligations

BOI reporting applies to all businesses organized or registered with the secretary of state, including corporations and LLCs. If your business falls into either of these categories, you will need to file an annual report with ownership information. Existing businesses founded before the end of 2023 have until January 1, 2025, to prepare and file their first BOI report. However, new businesses or the reporting of changes to previously reported information must file within 30 days of their inception or change. 

Navigating the Reporting Process

To ensure compliance, it is important to understand who is responsible for handling the BOI reporting. At this time, states are considering whether this reporting is considered the practice of law. If the states determine that it is, the filings must be completed by the business owner or someone authorized to practice law for them. If the states decide that it would not be considered the practice of law, other practitioners could complete this reporting if they choose to. If you would like to self-report, here is the link for BOI reporting: https://www.fincen.gov/boi 

Penalties and Exemptions

While BOI reporting is a compliance requirement, it is not accompanied by additional fees from FinCEN. However, willfully failing to report complete information can result in penalties of $500 per day, along with potential criminal penalties, including imprisonment and fines up to $10,000. It's important to emphasize that ignorance is not a valid defense, as willful noncompliance can have detrimental consequences. 

Exemptions from BOI reporting apply to certain businesses, including securities reporting issuers, government authorities, banks, credit unions, large operating companies ($5M in revenue plus additional qualifications) and more. However, most small businesses will not fall within these exempt categories. It is crucial to review the exemption criteria to determine if your business qualifies. 

Best Practices for Small Business Owners

To stay on top of BOI reporting, small business owners should proactively monitor any changes related to their ownership or legal structure. If things are steady as she goes, meaning no significant changes, it's advisable to keep BOI reporting on your radar and revisit it when necessary. However, in cases of new entity formations or ownership changes, prompt reporting is essential. 

Here are some key events that should make BOI reporting come to mind: 

• Existing entity deadline of 1/1/2025 
• Inception of a new entity registered with the Secretary of State – 30 days 
• Any changes of beneficial ownership – 30 days 
• Changes to previously reported information (think address change, name change) – 30 days 

Beneficial Ownership Information reporting may seem daunting at first, but with proper understanding and guidance, compliance can be manageable. As a small business owner, it is crucial to stay informed and work closely with your trusted advisors to ensure accurate and timely BOI reporting. Check out the FinCEN Small Business Compliance Guide to get you started. 

If you want help or have questions about your BOI, don’t hesitate to ask.