Today, I’m going to provide a comprehensive overview of beneficial ownership information (BOI) reports as of today’s date: what they are, why we have them, and what you need to do to stay compliant and avoid fines.
Here’s what’s getting business owners confused.
A legal challenge to the Corporate Transparency Act (CTA), the federal law behind beneficial ownership reporting, was recently decided in favor of the plaintiff. A federal district judge ruled that certain aspects of the CTA and beneficial ownership information requirements were unconstitutional. Since then, there’s been a lot of talk about future BOI requirements, which has led to some complacency.
The question is, what are your obligations as a business right now? I’ll give the short answer up front: You need to file a BOI report as soon as possible. Let’s add some context here so you’re up-to-speed on what I’m talking about.
Beneficial ownership information reports aim to combat fraud.
The CTA took effect at the beginning of the year and includes a provision requiring businesses to file detailed reports disclosing the identities and other personal information of business owners and shareholders.
If you benefit, you must supply information. That’s where we get BOI reports.
Who’s enforcing beneficial ownership reporting requirements?
That would be the Financial Crimes Enforcement Network (FinCEN)—a branch of the Department of the Treasury.
Beneficial ownership information will be compiled in a FinCEN database, granting authorities unfettered access. States were in the way. Now, they are not. It’s a familiar story, and whether you enjoy the ending probably depends on your view of the federal government.
In a recent press release, Secretary of Treasury Janet Yellen touted BOI requirements: “We’re closing a loophole and sending a clear message: The United States is not a haven for dirty money.”¹
The intent is to combat fraud and other illegal practices perpetrated by individuals who use shell companies as cover for illicit activities. On its face, this appears to be sincere and reasonable.
Beneficial ownership information reporting has had a rough start.
Business owners must log on to the FinCEN website and disclose a bevy of information. It’s a clunky website, the forms are poorly organized, and the language is needlessly complex. It’s a bit onerous for small businesses.
A district court has ruled against the Act, but the exempt party is the plaintiff.
The National Small Business Association (NSBA) recently sued the Department of Treasury. In March, the U.S. District Court for the Northern District of Alabama declared aspects of the CTA unconstitutional.
The ruling exempts the plaintiff from BOI requirements and other compliance measures contained in the CTA.
So, does the ruling affect your obligation to file? Absolutely not.
Beneficial ownership reporting remains mandatory.
The NSBA received a favorable ruling, but that ruling applies to the NSBA only. Every other business required to file, i.e., “reporting companies,” must comply with reporting requirements. The law and the underlying federal code have not changed.
There is no room for speculation about the effects of further litigation. You, the business owner, must provide the government with the beneficial ownership information, period.
Do you know your business’s filing deadline?
There are two filing deadlines, one for “existing companies” and another for “newly created or registered companies.”
Here are the details.
First, the BOI filing deadline for “existing companies.”
January 1, 2025 is the filing deadline for businesses registered or incorporated before January 1, 2024.
Were you in business and operating as a legal entity before January 1st of this year? If so, you are an existing company, and the filing deadline is January 1, 2025.
Second, the BOI filing deadline for “newly created companies.”
Businesses created or registered (as a legal entity) in 2024 are considered newly created businesses.
Have you recently—in 2024—received a letter from the state confirming that your company is registered to do business? Or do you plan on receiving a letter in 2024?
If you answered yes to either question, then your business has 90 calendar days from the receipt of the letter to file a BOI report.
File as soon as possible.
Approximately 32.6 million businesses will have to file this year, but only 100,000 have filed so far.² That tells me we have 100,000 proactive businesses. I recommend getting on that list as soon as possible.
Are there exemptions for beneficial ownership reporting requirements?
There are 23 exemptions that apply to a range of entities, from banks to insurance companies. Large businesses—those with at least 20 employees and over $5 million in gross receipts—are also exempt.
Odds are that your business is not exempt. See a complete list of exemptions on FinCEN’s frequently asked questions page for BOI reporting.
Here’s the information you need to provide in your BOI report.
Now that you know you should file, let’s take a look at the information that must be included in the report.
- Company Information: Name, address, jurisdiction of formation, and TIN.
- Beneficial Owner Information: Full name, date of birth, address, and government-issued identification (U.S. passport, driver’s license, or identification card for each beneficial owner). A beneficial owner is any individual who exercises substantial control over a reporting company.
- For newly created businesses, the same information is required for applicants.
Here’s how to file a BOI report with FinCEN.
Electronic filing is available through FinCEN’s secure filing system, and it’s open to business owners. We’ll walk through the steps, but I recommend against going it alone.
If you choose to file without professional consultation, simply follow the link above where you can choose one of the following filing options:
- Complete a fillable PDF on your computer and then submit it via the online portal.
- Fill out the fields directly on the FinCEN website.
- Use an automated process called system-to-system Application Programming Interface (API).
Again, I’d recommend consulting with a CPA.
Let’s talk about who is subject to failure-to-file penalties and fines.
According to the most recent ruling, any individual (and this would apply to you as a member or representative of your business) who willfully fails to report or provides false information could be fined up to $591 a day until the situation is rectified.
Individuals could also face a flat fine of $10,000 or, remarkably, the possibility of two years in prison.³
Get help from a credentialed expert.
I am currently offering CFO services for small businesses with high-level tax, accounting, financial leadership, and compliance, including full services for beneficial ownership information reporting.
Schedule a discovery call today, and we’ll get this taken care of quickly and correctly.
Talk soon,
Jeremy A. Johnson, CPA
References
- Remarks by Secretary of the Treasury Janet L. Yellen at the Financial Crimes Enforcement Network [Internet]. U.S. Department of the Treasury. [cited 2024 Apr 17]. Available from: https://home.treasury.gov/news/press-releases/jy2017
- Cox C. U.S. companies in no hurry to disclose ownership under new Treasury rule [Internet]. CNBC. 2024 [cited 2024 Apr 17]. Available from: https://www.cnbc.com/2024/01/08/companies-not-in-hurry-disclose-beneficial-ownership-new-treasury-rule.html
- Waggoner M. AICPA: BOI ruling confuses businesses; enforcement should be delayed [Internet]. Journal of Accountancy. 2024 [cited 2024 Apr 17]. Available from: https://www.journalofaccountancy.com/news/2024/apr/aicpa-boi-ruling-confuses-businesses-enforcement-should-be-delayed.html