Beneficial Ownership Information (BOI) Beginner's Guide and How to File by Rollo HCM

What You’ll Learn

1. The basics of beneficial ownership reporting
2. The requirements for BOI
3. How to determine if you qualify as a beneficial owner
4. The process for filing your BOI

Understanding beneficial ownership information (BOI) is crucial for businesses, as many will need to share these details with the Financial Crimes Enforcement Network (FinCEN). BOI reporting requirements stem from the Corporate Transparency Act, effective January 1, 2024.

Quick Facts:

• BOI reporting requirements began on January 1, 2024, but not all businesses are obligated to file.
• Required companies only report once unless there’s a change in ownership information.
• Reporting is completed online.

This legislation is part of efforts to reduce tax fraud, money laundering, and terrorism financing. Small businesses, in particular, should understand how to comply with these requirements. This guide explains BOI basics, who needs to file, and steps for filing with FinCEN.

Where to Begin with Beneficial Ownership Reporting

Starting January 1, 2024, many businesses must report their beneficial owners to FinCEN, a division of the U.S. Department of the Treasury.

Definition: Beneficial ownership information (BOI) is data about individuals who own or control a company. This requirement is mandated by the Corporate Transparency Act.

A beneficial owner is generally someone who:

• Directly or indirectly exercises significant control over a business
• Holds at least 25% ownership in the company

Purpose: BOI reporting aims to prevent money laundering, corruption, and terrorism financing by requiring businesses to disclose ownership details, including the beneficial owner’s name, address, and a government-issued ID for verification.

Note: A BOI report is typically a one-time submission unless the business ownership changes.

What Are the BOI Requirements?

Not every business is required to submit a BOI report, so it’s essential to determine whether your business needs to file or qualifies for an exemption. Certain organizations, such as banks and tax-exempt entities, are exempt. Check if your business falls into any of the exemption categories before proceeding.

Companies Required to File BOI
Corporations, limited liability companies, and other entities established through a state filing may need to submit BOI. Both U.S.-based and foreign companies doing business in the U.S. must comply.

Deadlines for Filing

• Businesses registered before January 1, 2024, must file their initial BOI report by January 1, 2025.
• For those created after January 1, 2024, the BOI report is due within 90 days of registration.
• After January 2025, new businesses must file within 30 days of registration.

Determining Beneficial Owners

If required to report BOI, businesses must identify all beneficial owners who have substantial control or a 25% ownership interest.

Substantial Control
A person has substantial control if they meet one of these criteria:

• Holds a senior officer role, such as CEO or CFO
• Has authority to appoint or remove senior officers or board members
• Has decision-making power that affects business operations
• Maintains other forms of control over the business

Ownership Interest
A person with at least a 25% stake in the business (e.g., equity, stock, voting rights) qualifies as a beneficial owner. Other examples include individuals with an interest in assets or profits, convertible interests, or options to buy or sell equity.

Exempt Entities
Twenty-three types of entities are exempt from BOI requirements, including large operating companies and certain government authorities. If you’re unsure, consult FinCEN before assuming an exemption.

Filing Your BOI

Follow these steps to file your BOI:

Step 1: Determine if You Need to File
Review FinCEN’s guidelines or use their Small Entity Compliance Guide to confirm whether your business must file.

Step 2: Identify Beneficial Owners and Applicants
If filing is required, list all beneficial owners and company applicants (those who initially registered the business).

Step 3: Prepare Required Information
Collect these details for filing:

• Business Information: Legal name, trade name (if applicable), current U.S. address, state, and jurisdiction of formation
• Owner and Applicant Information: Legal name, birthdate, current address, ID number, and an unexpired government-issued ID image (e.g., passport, driver’s license).

Step 4: Submit Your BOI
Submit the BOI report online via FinCEN’s website. You may download and complete a PDF or use the online reporting system.

Penalties for Noncompliance

Failure to comply with BOI reporting can result in penalties, including:

• Civil Penalties: Up to $591 per day per violation
• Criminal Penalties: Up to two years of imprisonment and/or a $10,000 fine
• Accountability: Senior officers may be held personally liable for incomplete or inaccurate filings.

BOI Resources for Employers

Here are resources to help employers understand BOI requirements:

• BOI Brochure
• Small Business Entity Guide
• Overview of the Final Rule
• FAQs
• FinCEN’s Filing Start Page

Bottom Line: Stay Informed on Beneficial Ownership Information

It’s wise for business owners to confirm if they need to file a BOI report. Filing can be a one-time task unless ownership changes. For assistance, consider consulting a bookkeeper or accounting professional.

Graph and Graphics Suggestions:

1. Timeline Graph: BOI Filing Deadlinessome text
   • Before January 1, 2024: Deadline of January 1, 2025
   • After January 1, 2024: Due within 90 days of registration
   • After January 2025: Due within 30 days of registration
2. Ownership and Control Flowchart: Determining Beneficial Ownerssome text
   • A flowchart to identify owners with substantial control or a 25% ownership stake.
3. Exempt Entities Table:some text
   • A table listing all 23 exempt entity types with descriptions for clarity.
4. Filing Steps Graphic:some text
   • Visual guide showing the FinCEN submission page, with sample form screenshots for users to follow.

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