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Managed Accounting, Tax Accounting

BOI Reporting Requirements in 2024: Guide for Business Owners

Posted on May 6, 2024

By Michele Roletter

May 16, 2024

Recent changes in the United States have introduced new mandates for LLCs, corporations, and other entities regarding Beneficial Ownership Information (BOI) reporting. Effective January 1, 2024, entities are required to adhere to the beneficial ownership reporting mandates outlined in the Corporate Transparency Act. This necessitates filing a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department.

Understanding and complying with these BOI reporting requirements not only demonstrates regulatory compliance but also shields businesses from potential penalties. The precise process of filing and determining the contents of the report can be challenging to ascertain. This is why we’ve devised the following guide to assist you in comprehending the new requirements as a business owner.

Overview of Reporting Entity Types: Who Needs to File a BOI Report?

Entities mandated to report are termed “reporting companies.” These entities may be required to gather information from their beneficial owners and submit it to FinCEN. Your company might need to disclose information concerning its beneficial owners if it falls into one of the following categories:

  1. It is a corporation, limited liability company (LLC), or was established in the United States through the submission of documents to a secretary of state or similar office under state or Indian tribe law.
  2. It is a foreign company that has registered to conduct business in any U.S. state or Indian tribe through such filings.

The distinction between a domestic and foreign reporting company is straightforward. A domestic reporting company is one established within the United States, while a foreign reporting company is created outside the U.S. but operates in the country through registration with a secretary of state or equivalent authority.

Understanding BOI Reporting Exemptions

There are twenty-three categories of entities that are exempt from the reporting obligations for beneficial ownership information. These exemptions encompass publicly traded companies, non-profit organizations, and specific large operating entities. FinCEN’s Small Entity Compliance Guide contains checklists for each of these exemptions, aiding in determining whether your company qualifies for an exemption. Refer to Chapter 1.2 of the Guide for comprehensive information.

How Can I Submit a Report?

Reporting entities electronically submit beneficial ownership information via FinCEN’s website: www.fincen.gov/boi. Upon filing a completed report with FinCEN, the system generates a confirmation of receipt.

Registration Requirements with FinCEN

As a business owner preparing to file BOI reporting requirements with FinCEN, you may find yourself pondering the specific information you need and how to gather it. Fortunately, the data necessary for both companies and beneficial owners is generally similar to that required for many other reporting processes. However, it’s essential to familiarize yourself with certain terms, such as “Reporting Company,” “Beneficial Owners,” “Company Applicant,” and more.

1. Reporting Company Information

A reporting company encompasses any entity formed or registered within the U.S. by submitting documentation to a secretary of state or similar authority. When initiating a BOI report, a reporting company must furnish the following details:

  1. Complete name
  2. Any trade name or “doing business as” (DBA) name
  3. Current U.S. street address
  4. State, or foreign jurisdiction of formation
  5. Internal Revenue Service (IRS) Taxpayer Identification Number (TIN), including an Employer Identification Number (EIN)
  6. State jurisdiction of initial registration, if applicable to a foreign reporting company

2. Beneficial Owners

A beneficial owner refers to an individual who directly or indirectly holds or controls 25% or more of the ownership interest in a reporting company, or exercises substantial control over it. Ownership interest includes equity, stock, voting rights, capital or profit interest, or other mechanisms indicating ownership. Substantial control entails being a senior officer, having authority over officer or director appointments, serving as a key decision maker, or possessing other significant forms of control. Exemptions to the definition of beneficial owner apply in certain circumstances involving:

  1. A minor child
  2. A nominee, intermediary, custodian, or agent
  3. An employee
  4. An inheritor
  5. A creditor
  6. Information required for beneficial owners in a BOI report includes:
  7. Full legal name
  8. Date of birth
  9. Current street address
  10. A unique identifying number from an acceptable document, such as a passport or driver’s license, or a FinCEN identifier
  11. An image of the document containing the identifying number

A FinCEN identifier is a unique number issued by FinCEN to individuals who have submitted or requested a BOI report, serving as an alternative to providing an identification document number. Requests for a FinCEN identifier can be made through an online portal starting January 1, 2024.

3. Company Applicant

A company applicant is an individual who initiates or oversees the submission of documents establishing or registering the reporting company. This individual could be an owner, manager, or representative of the reporting company, or a third-party service provider such as a lawyer, accountant, or incorporation service. Not all reporting companies are required to report company applicants to FinCEN. Reporting of company applicants is obligatory only for domestic reporting companies established on or after January 1, 2024, or foreign reporting companies initially registered to operate in the United States on or after January 1, 2024. Information needed for company applicants in a BOI report mirrors that of beneficial owners:

  1. Complete name
  2. Date of birth
  3. Current address
  4. A unique identifying number from an acceptable document, such as a passport or driver’s license, or a FinCEN identifier
  5. An image of the document containing the identifying number

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BOI Reporting Filing Deadlines and Procedures

It’s important to note that the obligation to file a BOI report only came into effect on January 1, 2024. The positive aspect is that if you are required to report, FinCEN began accepting beneficial ownership information reports from that date onwards. For companies in existence before January 1, 2024, the deadline for filing your report is January 1, 2025. However, for LLCs or other entities formed between January 1, 2024, and January 1, 2025, there is a 90-day window to submit their initial report. This countdown begins upon receipt of actual notice from the secretary of state or a similar office indicating the completion of your registration.

Starting in 2025, newly established companies will have 30 days from the date of receiving their actual or public notice to file their initial report. Companies obligated to file a BOI report can do so electronically through FinCEN’s secure filing system. It’s worth noting that FinCEN recognizes that certain reporting companies may encounter difficulties in electronic filing and may need to contact FinCEN for assistance.

Penalties for Non-Compliance

Neglecting to submit BOI reporting carries significant consequences, including both civil and criminal penalties. Failure to file can lead to a daily fine of $500, accumulating to a maximum of $10,000, and a potential imprisonment term of up to two years. Moreover, unauthorized disclosure of BOI information carries its own penalties, with fines of $500 per day, reaching a ceiling of $250,000, and the possibility of incarceration for up to five years. It’s critical to adhere to reporting requirements and ensure that any disclosure of BOI information is authorized to avoid these severe repercussions.

A Way Forward

Overwhelmed by the process of filing BOI reporting? Unsure if you need to file to begin with? Our tax accounting, audit, and compliance team at KDG is available to assist our clients with determining the applicability of any exemptions to the definition of reporting company, identifying beneficial owners, and otherwise preparing for the implementation of the Final Rule, including offering training to your compliance and operations teams. We encourage our clients to get additional guidance from our seasoned attorneys and accountants, begin discussions to determine exemption status and/or prepare for reporting, and assess how FinCEN’s Final Rule may otherwise impact your operations. Contact us now to get started.

Steve Solt headshot

Michele is an accomplished Accountant, bringing a wealth of knowledge and expertise to her current CPA role at KDG. Experienced in Sage Products, Tax Preparation, GAAP, Financial Accounting and Managerial Accounting. Michele has spent her career overseeing tax preparation and accounting services at a multitude of organizations, even owning her own successful CPA firm.

Want to learn more? Book a meeting with us today!

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