Understanding Beneficial Ownership Information (BOI): What It Is, Filing Requirements, and Why You Need a Licensed Accountant
The Beneficial Ownership Information (BOI) reporting is part of the U.S. government’s commitment to increasing transparency around business ownership. Under the Corporate Transparency Act (CTA), many companies must now disclose detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This initiative aims to combat financial crime, like money laundering and tax evasion, by making it easier for authorities to track the individuals who ultimately own or control corporate entities. In this comprehensive article, we’ll explain what BOI is, who must file, and why it’s worth considering a licensed and insured accountant to handle the filing requirements for you.
What is Beneficial Ownership Information (BOI)?
Beneficial Ownership Information (BOI) refers to the personal data that identifies the individuals who own or control a business. Historically, certain entities, especially smaller corporations and limited liability companies (LLCs), could avoid disclosing ownership details. The CTA closes this gap by requiring most of these entities to report their beneficial ownership.
FinCEN collects BOI data to promote transparency and ensure that businesses cannot conceal their ultimate ownership, particularly in cases where complex ownership structures might otherwise mask the individuals involved. This information is critical for:
- Preventing Fraud: By requiring beneficial ownership disclosure, FinCEN aims to reduce fraud risks associated with concealed ownership structures.
- Enhancing Transparency: BOI filings allow government agencies to track and monitor ownership, which is particularly beneficial in financial investigations.
- Combating Financial Crimes: With a clear understanding of who owns and controls entities, law enforcement can more effectively deter financial crimes, such as tax evasion and money laundering.
Who Needs to File BOI Reports?
BOI reporting requirements apply to a range of entities, specifically those that may have previously had little or no obligation to disclose ownership information under state or federal regulations.
Entities that must file include:
- Corporations and LLCs: This includes domestic and foreign corporations and LLCs registered to do business in the United States.
- Similar Entities Created by State Filing: Any entity that is created by filing paperwork with a U.S. state or Indian Tribe, such as certain partnerships and associations, is likely to be required to report its beneficial owners.
Some organizations, however, are exempt due to their high level of regulatory oversight, including:
- Banks
- Publicly traded companies
- Insurance companies
- Investment companies and advisors registered with the SEC
What Information is Required in a BOI Filing?
BOI filings require specific details about each beneficial owner. For each beneficial owner, the following information must be reported:
- Full Legal Name: The complete legal name of the beneficial owner.
- Date of Birth: The individual’s birth date.
- Current Address: This should be the residential address for individuals and the business address for entities.
- Unique ID Number from an Acceptable Document: This might include a passport, state ID, or driver’s license number and the issuing jurisdiction.
- Photocopy of ID Document: A copy of the ID document must be included for verification.
Who is a Beneficial Owner?
Under the CTA, a beneficial owner is anyone who owns or controls at least 25% of the ownership interests in the company or who has substantial control over it. This can include:
- Individuals with significant decision-making authority,
- Major stakeholders, or
- Individuals who control the company indirectly through relationships, financial ties, or other arrangements.
BOI Filing Deadlines
The deadlines for BOI filings depend on when the entity was created:
- Existing Entities: Companies formed before January 1, 2024, have until January 1, 2025, to file.
- New Entities: Companies created or registered after January 1, 2024, must file their BOI within 30 days of receiving their registration confirmation.
In addition, updates are required:
- If a beneficial owner’s information changes, entities have 30 days to report the updated information.
- In case of filing errors, corrections must be submitted within 30 days of discovering the mistake.
Penalties for Non-Compliance
Failure to comply with BOI requirements can lead to severe penalties:
- Civil Penalties: Non-compliance can result in hefty civil fines.
- Criminal Penalties: Willfully failing to file or submitting false information can lead to criminal fines and, in extreme cases, jail time.
How to File a BOI Report with FinCEN
- Create an Account on FinCEN’s Portal: BOI filings are typically submitted electronically. Start by creating an account.
- Prepare the Required Documentation: Gather all necessary information about beneficial owners.
- Complete and Submit the BOI Report: Once filed, keep a copy of the submission for your records.
- Monitor for Changes: Stay vigilant for any ownership changes that would require updating your BOI filing.
Why You Should Consider Using a Licensed and Insured Accountant to File Your BOI
Although it might seem simple, filing a BOI report has legal and financial implications, especially given the strict requirements and possible penalties. Hiring a licensed and insured accountant can make the process easier and provide added security. Here’s why it’s a smart choice:
1. Ensuring Accuracy and Compliance
Licensed accountants are trained to handle intricate regulatory filings, ensuring that all necessary details are included. With complex ownership structures, an experienced accountant will:
- Identify each beneficial owner accurately.
- Include all required information, minimizing errors and reducing the risk of penalties.
2. Avoiding Costly Penalties
Civil and criminal penalties for BOI non-compliance are steep. An accountant helps prevent:
- Late filings by tracking important deadlines.
- Costly errors by ensuring the filing is accurate and up-to-date.
3. Secure Handling of Sensitive Information
BOI filings include highly sensitive personal information, which must be handled securely to prevent data breaches or identity theft. Licensed accountants and enrolled agents are legally bound to handle data confidentially and can protect your information from unauthorized access.
4. Expertise in Beneficial Ownership Rules
Determining who qualifies as a beneficial owner can be complicated, especially if your business has multiple owners or non-traditional relationships. Accountants are experienced in these scenarios and can:
- Accurately identify beneficial owners.
- Ensure your filing complies with BOI regulations, even in complex ownership structures.
5. Insurance for Added Protection
An insured accountant provides financial protection if a filing error occurs. Should an issue arise, professional liability insurance can offer peace of mind, knowing that:
- You’re protected from financial loss due to mistakes.
- The risk is not solely on your business if something goes wrong.
6. Awareness of Filing Requirement Updates
BOI requirements may evolve, and licensed accountants stay informed about regulatory updates, ensuring that:
- Your filings are compliant with the latest rules.
- You’re aware of any changes in deadlines or requirements.
7. Customized Advice for Unique Situations
Every business is unique, and an accountant can provide tailored advice for complex ownership arrangements, helping to clarify:
- Which ownership interests to disclose.
- How to handle complex control structures.
Need Help Filing Your BOI?
If you have questions or would like assistance with your beneficial ownership reporting, we would love to help. Our team is fully licensed and insured with the right experience to ensure your BOI is filed timely and correctly.
FInal Thoughts: Allow Our Firm to Ensure Filing Accuracy
Filing BOI reports accurately and on time is essential to avoid penalties and stay compliant with federal regulations. By hiring a licensed and insured accountant, you benefit from their knowledge, expertise, and security measures, making it easier to navigate the BOI filing process. For businesses with complex ownership structures or those new to the BOI requirements, enlisting a professional can be invaluable, offering peace of mind and protecting your business from costly penalties.
Contact our team today to get started. We will assess your filing needs and provide upfront pricing for our services. We're able to work with you remotely by phone and e-mail or through in-person meetings, whichever you prefer.