How to Stay Compliant with BOI Reporting Requirements?

The Corporate Transparency Act has introduced BOI reporting to increase transparency in businesses. It’s kind of the government’s way of keeping tabs on the people who are pulling the strings in businesses across various states in the USA.

It involves individuals’ disclosure of information on who has a lot of control in a legal entity. If you’re asking what is BOI reporting, then this is for companies with less than 20 full-time employees and who are making less than $5 million in gross receipts, as reported in their returns. Overall, this is needed because it refers to identifying information about the people who directly or indirectly own a company. 

A reporting company can be an LLC or a domestic corporation that’s been created by filing with a secretary of state. Beneficial owners should be actual people, and the applicant is the one who filed the formation documents. The Financial Crimes Enforcement Network (FinCEN) oversees the entire process, and the owner should be an individual who owns at least 25% of the company’s equity interests.

It was passed by Congress on a bipartisan basis. It’s a law that helps the government’s efforts to make it difficult for bad actors to hide their ill-gotten wealth from shell companies. It also prevents opaque ownership structures.

Who Needs to Comply with BOI Reporting?

Many startups are often required to file the BOI report, and this includes the pre-revenue businesses. Exempt entities are often the ones that have over $5 million in gross receipts, so this is often for small to medium-sized businesses. Also, foreign-owned US entities are affected by these regulations. 

Unnecessary filings can also happen, so you need to understand the exemptions to the rules. Those companies that assume that they are already exempt without proper verification are also at risk for non-compliance. When there are uncertainties about where the business may fall under BOI reporting obligations, consulting an expert can help clarify these misunderstandings and avoid a lot of fines.

What’s the Information Required for Filing?

It’s important to include company details and start with the basics. Owners need to include their legal name, tax identification number, US business address, jurisdiction, and formation date. For each beneficial owner, their personal information, including their date of birth, will also be needed. 

A valid government-issued ID should be included, and the individual who was responsible for the formation documents will also need to provide the same information as the owners to create a chain of responsibility from the company’s beginning.

Knowing who the owners are who meet the 25% substantial control threshold is the first step. Then, a FinCEN account will be set up on their website with your corporate profile included. An identifier can be optional, but getting this will make future filings smoother. When you’re ready, you can submit the report while thoroughly reviewing everything before entering it into the system.

Maintaining compliance isn’t just a one-time filing job. Any changes in the company about beneficial ownership should be reported within 30 days. Also, it’s best to develop a system where digital copies of all supporting documents should be available. Track the filing dates and the deadlines so you don’t miss them.

With the help of the right company, you can get a guide every step of the way for better compliance. The right firm can answer your questions, and these professionals will be dedicated to supporting you. They will check your information, keep you updated with the latest laws, and clarify any complex ownership structures in the company. Don’t hesitate to ask for help because these accountants will do everything right for you.

Filing Requirements and Deadlines

Reports should be filed through the FinCEN designated electronic system, and businesses that were formed before January 1, 2024, have until January 1, 2025, to submit their reports. The ones registered in 2024 should file their reports within 90 calendar days after receiving the public notice that the registration is effective. Any company created on or after January 1, 2025, will have 30 days to file after receiving the public notice of their registration.

Everything should be accurate, and if there’s a new address, it should also be submitted through an amended report. You need to keep everything organized and be proactive so you can maintain the regulators’ trust.

You can file the report directly to FinCEN without any help from third-party entities. However, if you’re unsure about what to do, you can seek help from an accountant to improve the accuracy of your filings. Incorrect paperwork can trigger an audit. So make sure that all pieces of information that you submit are right the first time.

Consequences of Non-Compliance

Companies should be made aware of the consequences of not filing because the penalties can be expensive. This can translate to $591 per day for missing or late reports. While the criminal charges can include imprisonment and a fine not to exceed $250,000. And a call for imprisonment of not more than 10 years. 

If the person has unauthorized access to the information while in violation of another law, it can result in an enhanced penalty of $500,000 with imprisonment. Aside from these hefty financial penalties, a con-compliant company can hurt its reputation, and it can result in business disruptions. Companies should seek to maintain credibility with their stakeholders, so staying compliant with the BOI reporting is important.

Final Thoughts

Businesses should stay compliant with the requirements, and they need to make sure that the ownership structures are accurate. The beneficial ownership information has been established by the CTA to put accountability into organizations. They need to be diligent in meeting their obligations. However, the data that’s submitted to FinCEN is not available to the public.

Various firms have a lot of datasets that can facilitate entity verifications and confirm ownership information. If you’re unsure about what to do, you can contact the experts. They can integrate the BOI into your compliance and risk management process so you can avoid penalties.

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