- What is a BOI Report?
- Who Needs to File a BOI Report for LLCs?
- What Happens If You Don’t File a BOI Report?
- How to File a BOI Report
Q: What is a BOI Report?
A: A BOI Report is a mandatory filing that provides the government with details about the individuals who own or control a company. This report is part of new BOI reporting requirements aimed at increasing corporate transparency.
Starting January 1, 2024, the Beneficial Ownership Information (BOI) reporting requirements took effect, impacting LLCs and other small businesses.
These new rules are designed to increase transparency in corporate ownership, helping combat financial crimes such as money laundering.
For small business owners, filing a BOI report is crucial to stay compliant with federal regulations.
Failure to meet the deadlines could result in fines up to $10,000 or even imprisonment.
What is a BOI Report?
A Beneficial Ownership Information (BOI) report is a critical filing required by the Corporate Transparency Act (CTA), aimed at identifying the individuals who directly or indirectly own or control a company.
This filing is designed to help combat illegal activities such as money laundering, fraud, and terrorism financing by making it harder for anonymous shell companies to hide illicit financial transactions.
In a BOI report, business owners must provide specific details about their beneficial owners.
A beneficial owner is any individual who owns at least 25% of the company’s shares or exercises substantial control over the business.
This definition includes key decision-makers like senior officers or individuals with authority to appoint or remove directors.
It’s important to note that the information provided in the BOI report will be stored in a secure database managed by FinCEN (Financial Crimes Enforcement Network).
This data is only accessible to authorized entities, such as law enforcement agencies, national security bodies, and certain financial institutions.
The goal is to ensure the information is used strictly for legal and security purposes.
Why Does This Matter?
The introduction of BOI reporting is part of a broader initiative to enhance corporate transparency across the U.S. economy.
By creating a national registry of beneficial ownership, the government can more effectively track down illicit activities.
For small business owners, especially those running LLCs, filing a BOI report is not just a regulatory burden but also a step toward fostering trust and accountability in the marketplace.
Even though filing a BOI report may seem like an extra administrative task, the process is relatively simple, especially for companies with straightforward ownership structures.
According to FinCEN, the filing should take no more than 20 minutes in most cases, and it can be done online using a trusted company like Harbor Compliance.
Who Needs to File a BOI Report for LLCs?
The BOI reporting requirements apply to most small businesses, including LLCs and corporations. If your business was formed by filing paperwork with the state, you likely need to file a BOI report.
This includes foreign companies registered to do business in the U.S. However, not all businesses are required to file a report.
There are over 20 exemptions, primarily for businesses that are already heavily regulated. For example, banks and publicly traded companies are exempt.
Common businesses required to file include:
- LLCs (Limited Liability Companies)
- Corporations
- Certain non-profits
- Limited partnerships
- Foreign companies registered in the U.S.
If your business qualifies as a “reporting company,” it’s essential to ensure the BOI report is accurate and submitted on time. Failing to comply could lead to severe penalties.
How to determine if your LLC needs to file:
Start by evaluating your LLC’s ownership structure. Does anyone own 25% or more of the company?
Next, confirm that your LLC was formed by filing with a state or similar office. If it was, and you don’t meet any exemptions, you likely need to file.
If your LLC has a simple ownership structure, the process will be straightforward. Regardless, filing on time is essential to avoid fines.
What Happens If You Don’t File a BOI Report?
Failure to comply with BOI reporting requirements can lead to significant consequences. Penalties include daily fines of up to $500, with a maximum of $10,000, and imprisonment for up to two years for willful violations.
If your LLC or business doesn’t file a BOI report on time, legal action may follow, along with potential damage to your business reputation.
This is especially critical for companies managing remote teams or multiple locations, as compliance becomes more complex. For tips on ensuring your business remains compliant, check out this guide on remote team management.
Key consequences of not filing include:
- Fines of $500 per day
- A cap of $10,000 for extended non-compliance
- Possible imprisonment for up to two years
Incorrect or incomplete filings also carry penalties. If your business’s ownership structure changes, you have 30 days to update the BOI report.
To avoid mistakes and penalties, follow best practices for business management, and ensure you submit your filings accurately and on time.
How to File a BOI Report
Filing a BOI report is an essential step for ensuring your business remains compliant with the Corporate Transparency Act.
This process is designed to disclose key information about the beneficial owners of your business. For LLCs and other entities required to file, it’s important to complete this report accurately and within the deadlines to avoid penalties.
The first step in filing your BOI report is gathering the necessary details about your beneficial owners. A beneficial owner is defined as any individual who holds at least 25% ownership in the company or has substantial control over its operations.
This could include members with voting rights, individuals with the authority to appoint or remove key officers, or anyone who plays a significant role in making high-level business decisions.
Once you’ve identified your beneficial owners, you’ll need to collect specific information for each individual. The key details required include their full legal names, current residential or business addresses, Tax Identification Numbers (TIN), and ownership percentages.
If any of these details change in the future, you’ll need to update the BOI report within 30 days to remain compliant.
After gathering this information, the next step is to submit your report through Harbor Compliance.
They’ve streamlined this process to make it as user-friendly as possible for small business owners, especially those with simple ownership structures. For most companies, this filing process should take about 20 minutes to complete.
Steps to file a BOI report:
- Gather Required Information: This includes the legal names, residential or business addresses, ownership percentages, and TINs for all beneficial owners.
- Submit Your Report: Use Harbor Compliance to submit your report. The system is designed to handle most reports quickly, especially for businesses with straightforward ownership structures.
- Ensure Accuracy: Make sure all information is complete and accurate. Inaccuracies or incomplete filings can result in penalties, so double-check your report before submission.
- Update the Report as Necessary: If there are any changes in ownership or control within your business, you must update your BOI report within 30 days. This includes changes in the percentage of ownership, the addition of new owners, or any changes to the addresses of beneficial owners.
While this process may seem simple, it’s essential to stay diligent in keeping your business compliant. Businesses that fail to file on time or submit inaccurate information face severe penalties.
For LLCs and small businesses, the fines can be as high as $10,000, and in some cases, non-compliance can lead to imprisonment.
Additionally, businesses with complex ownership structures or those with multiple layers of ownership may find the process more time-consuming. In such cases, seeking legal guidance or consulting with a tax professional might be helpful to ensure that your report accurately reflects the ownership and control structure of the business.
Once you’ve submitted your initial BOI report, you don’t need to file again unless there are changes to report.
The system is designed as a one-time submission, with updates only required when there’s a significant shift in ownership or control.
This makes it relatively low-maintenance for small businesses, provided you stay on top of any changes that occur.
Filing a BOI report may seem like another task on a business owner’s long list of responsibilities, but it’s crucial for maintaining compliance and protecting your business from penalties.
What Information Do You Need for a BOI Report?
To complete your BOI report, you’ll need to gather specific information about your business’s beneficial owners.
The key here is accuracy—any errors or missing details can result in penalties.
For each beneficial owner, you’ll need to provide their full legal name, current address, Tax Identification Number (TIN), and details about their ownership or control within the company.
It’s important to identify who qualifies as a beneficial owner.
A beneficial owner can be anyone who directly or indirectly owns at least 25% of the company. It also includes individuals who hold significant control, such as senior officers or key decision-makers.
If a person can influence major company decisions or appoint/remove executives, they qualify as a beneficial owner, regardless of their ownership percentage.
Here’s the specific information you’ll need:
- Full Legal Name: This should match their identification documents, ensuring there’s no confusion.
- Residential or Business Address: This must be current and accurate for each beneficial owner.
- Tax Identification Number (TIN): For U.S. citizens, this is generally their Social Security Number. For non-U.S. individuals, an equivalent foreign ID is required.
- Ownership Percentage or Control Description: You’ll need to clarify whether the individual has ownership, voting rights, or substantial control over the business.
Having all of this information ready in advance will make the filing process much smoother. For LLCs and other small businesses, this process is fairly straightforward if your ownership structure is simple.
However, if you have multiple layers of ownership or complex structures, it might be beneficial to seek legal guidance to ensure accuracy.
Once the initial BOI report is filed, you’re not done just yet.
Any changes to the ownership structure, including adding new owners or changing control details, must be updated within 30 days. Staying on top of these changes is critical to avoiding penalties and maintaining compliance.
For small business owners, keeping accurate records of beneficial owners and maintaining up-to-date filings can prevent legal trouble down the road.
Filing accurately and in a timely manner not only protects your business but also ensures you’re contributing to broader efforts to combat financial crimes.
When Do You Need to File a BOI Report?
The timing for filing a BOI report depends on when your business was created.
For businesses formed before January 1, 2024, the deadline to file the initial report is January 1, 2025. If your business was formed after January 1, 2024, you must file your BOI report within 90 days of receiving your official registration or formation notice.
Moving forward, any business created after January 1, 2025, will have 30 days from its registration or formation date to file the report. It’s crucial to stay on top of this deadline because penalties for late filings can be severe.
If your business experiences any changes in ownership or control, you’ll also need to update the BOI report within 30 days of the change.
This is particularly important for LLCs or small businesses with evolving structures, as ownership changes are not uncommon.
Maintaining an updated BOI report ensures your business remains compliant and avoids unnecessary legal trouble.
Key deadlines:
- For businesses formed before January 1, 2024: Deadline is January 1, 2025.
- For businesses formed between January 1, 2024, and January 1, 2025: You must file within 90 days of receiving registration notice.
- For businesses formed after January 1, 2025: You have 30 days from the date of formation to file.
What Happens After You File a BOI Report?
After you’ve successfully filed your BOI report, your responsibility doesn’t end there. While the initial report only needs to be submitted once, it’s critical to keep it updated if any changes occur in the structure of your business.
This includes changes in ownership percentages, the addition or removal of beneficial owners, or even changes to a beneficial owner’s personal information, such as their address.
Whenever there’s a change, you must update the BOI report within 30 days. Failure to make these updates can lead to penalties, just like missing the initial filing deadline.
This ensures that your business stays in compliance with federal regulations and avoids legal consequences.
It’s also important to remember that the information in your BOI report is kept in a secure, non-public database, accessible only by authorized government entities. These include law enforcement agencies and national security bodies.
The purpose of this is to ensure your business ownership details are used only to protect the financial system and combat illicit activities, such as money laundering or fraud.
What to do after filing:
- Monitor your ownership structure: Keep an eye on any changes in ownership, control, or other reportable details.
- File updates within 30 days: Ensure all updates are reported promptly to stay compliant.
- Stay informed: Regularly check FinCEN guidelines to ensure no new reporting obligations arise for your business.
Wrapping Up: BOI Report
Filing a BOI report is now a critical requirement for small businesses, particularly LLCs, as part of the Corporate Transparency Act.
Understanding what information you need, when to file, and how to keep your report updated can protect your business from costly penalties and legal trouble.
By staying compliant with BOI reporting, you ensure your business is transparent and aligned with federal regulations.
Further Reading
- 7 Must-Have Online Tools For Remote Teams And Businesses
- Why Every Law Firm Needs a Virtual Receptionist: Streamline Your Practice with Alliance Virtual Offices
- Unlock Financial Success: The Ultimate Guide to Small Business Accounting
Make sure to file your initial report before the deadlines, and remember to update it whenever there’s a change in ownership or control.
Being proactive with your filings is essential for maintaining compliance and avoiding the steep consequences of non-compliance.
For small business owners, timely and accurate BOI reporting is not just about meeting regulatory requirements—it’s about protecting the integrity of your business and contributing to broader efforts to combat financial crimes.
