The Beneficial Ownership Information Report
ALL THE DETAILS ON WHAT YOU’RE REQUIRED TO FILE AS A BUSINESS OWNER
If you’ve been scrolling through TikTok or Instagram these past few weeks, you’ve probably run into a video like this.
Got to love those scare tactics.
But…they aren’t wrong. There IS a new rule that is taking effect in 2024 that business owners need to know about, called the Beneficial Ownership Information Report Rule, and if you don’t comply, you could be fined $500 per day or up to 2 years in prison.
So it’s kind of important. And we’ve got all the details for you below.
WHAT IS THE BOI REQUIREMENT?
Essentially, FinCEN (Financial Crimes Enforcement Network) wants to know which individuals ultimately own or control a legal entity. Thus, this requirement is going to require detailed data about individuals (like you and me) who own a business in the US.
WHY ARE THEY REQUIRING THIS?
Ever watched the show “Ozarks” on Netflix? Well, that’s why.
We all know corporations and LLCs play a vital role in the US's economy, and they are popular structures as they limit the personal liability of its owners. However, while they definitely help owners protect their personal assets, they also create opportunities for owners to hide behind these entities and engage in illegal activity, like money laundering (*cough* Marty Byrde *cough*) and terrorist financing.
Thus, the Corporate Transparency Act (CTA) was signed back in January of 2021 in a move to help create more transparency and disclosures about who owns what. This new rule will require reporting of all beneficial owners of the organizations, which is any member who owns or controls at least 25% of the company's ownership interests or exercises substantial control.
WHO IS REQUIRED TO FILE?
This rule affects all businesses who fall into the category of "reporting company". There are two types of reporting companies that are required to file, unless they meet the qualifications for an exemption:
Domestic: "Domestic refers to corporations, LLCs, or any entities that were created by filing documents with the secretary of state." (Note: This includes any of these entities that elect to be S Corporations for tax purposes.)
Foreign: "Foreign refers to corporations, LLCs, or any entities formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with the secretary of the state."
So who’s excluded?
· Sole proprietorships, general partnerships, and certain trusts
· Businesses with 20+ employees and $5 million in receipts, and
· Publicly traded companies, certain financial institutions, insurance companies, and non-profits
You can find the full list of exemptions here.
Cliff note version: If you’re registered with your state as a corporation or LLC (even if you file as an S Corp for tax purposes), you are more than likely required to file.
WHEN DO YOU HAVE TO FILE?
Depending on when you start (or started) your business, you have different deadlines for filing this report:
For businesses established prior to January 1, 2024, you have until January 1, 2025 to file.
For the companies registered with the secretary of state after that date, they have 90 days to file until December 31, 2024.
Any companies registered after January 1, 2025 have to file this report within 30 days.
HOW TO FILE?
FinCen will begin to accept reports on January 1, 2024. Once made available, you will be able to file through this link and you will need to report the following information:
Owner’s Name
Date of Birth
Residential Address
ID Number from Acceptable Identification (e.g. passport, driver’s license, etc.)
Image of document
No fee will be charged for filing the BOI Report and this only needs to be filed once unless there are ownership changes in your business.
Again, if you want to keep your hard-earned money and remain sleeping under your own roof, this is an important requirement to ensure you take care. Put a reminder on your calendar in January to complete this for your business.
And as always, if you need help, reach out to your lawyer or CPA.
