Starting January 1, 2024,
almost every small business is required to file a Beneficial Ownership
Information (BOI) Report. This new reporting rule is a result of the Corporate
Transparency Act, enacted by Congress in 2021.
Failure to comply with this new law may result in penalties of up to $500
each day your business is out of compliance.
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What is Beneficial Ownership Information?
BOI reveals the real people who own or control a company or trust, even if their names aren't on official documents. These individuals, known as beneficial owners, benefit financially from the entity's activities. They might be shareholders, directors, or hidden behind complicated ownership structures.
1. Identification of Beneficial Owners: Legal entities, such as companies or trusts, are typically required to identify their beneficial owners. This includes gathering information such as names, addresses, and other identifying details of individuals who ultimately own or control the entity.
2. Disclosure of Ownership Stake: Entities may be required to disclose the percentage of ownership or control that each beneficial owner holds. This information helps to determine the extent of influence or control exerted by each individual.
3. Nature of Control: Alongside ownership stake, entities may need to provide descriptions of the nature of control exerted by beneficial owners. This could include details regarding voting rights, decision-making authority, or other forms of influence.
4. Maintaining Accurate Records: Entities are typically obligated to maintain accurate and up-to-date records of their beneficial owners. This ensures that relevant authorities and stakeholders have access to current information when needed.
5. Reporting to Regulatory Authorities: Depending on the jurisdiction, entities may be required to report their BOI to relevant regulatory authorities. This could involve periodic filings or notifications of changes in beneficial ownership.
6. Ensuring Compliance: Entities are responsible for ensuring compliance with BOI requirements, which may involve conducting due diligence to verify the accuracy of information provided by beneficial owners.
7. Penalties for Non-Compliance: Non-compliance with BOI requirements may result in penalties or sanctions, including fines or other enforcement actions imposed by regulatory authorities.
Who is Required to File?
Companies required to report Beneficial Owner Information (BOI) to FinCEN are called reporting companies. There are two types of reporting companies:
Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
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