As the Financial Crimes Enforcement Network (FinCEN) ramps up its outreach efforts, it's crucial for small business owners and self-employed individuals to stay informed about the Beneficial Ownership Information (BOI) reporting requirements. With the Corporate Transparency Act (CTA) now in full effect, over 32 million businesses are required to report detailed information about their beneficial owners. Here’s what you need to know to ensure compliance and avoid costly penalties.
What is BOI Reporting?<
Under the Corporate Transparency Act (CTA), businesses are required to disclose information about individuals who own or control 25% or more of the entity or who exercise substantial control over it. This measure is designed to combat financial crimes, such as money laundering and terrorism financing, by increasing transparency in corporate ownership.
Who Must File?<
The BOI reporting requirement applies to a broad range of entities, including corporations, limited liability companies (LLCs), and other similar entities formed or registered to do business in the United States. Notably, this requirement impacts both new entities and existing ones:
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New Entities: Companies incorporated or registered after January 1, 2024, must submit their BOI reports within 90 days of formation.
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Existing Entities: Businesses formed before January 1, 2024, have until January 1, 2025, to file their initial reports.
What Information Must Be Reported?<
Businesses must report the following information about each beneficial owner and applicant (the individual who filed to create the entity):
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Full legal name
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Date of birth
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Current residential or business address
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A unique identifying number from an acceptable identification document (e.g., passport or driver’s license)
This information helps authorities track and identify individuals who have significant control over a business, thereby reducing the use of anonymous shell companies for illicit activities.
Why is This Important?<
Failing to comply with BOI reporting requirements can result in severe penalties, including:
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Monetary Fines: Businesses that willfully violate the BOI reporting requirements may be fined up to $591 per day, with a maximum penalty of $10,000.
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Criminal Penalties: Non-compliance can also lead to imprisonment for up to two years.
Given these substantial consequences, it's essential for small businesses to understand and adhere to these new regulations.
Practical Steps for Compliance<
To ensure your business meets the BOI reporting requirements, consider the following steps:
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Identify Beneficial Owners: Review your business structure to identify all individuals who qualify as beneficial owners under the CTA.
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Gather Required Information: Collect the necessary details, including identification documents for each beneficial owner and applicant.
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File Your Report: Submit your BOI report through FinCEN’s online portal before the applicable deadline. Ensure that you update your report within 30 days if there are any changes to your business’s ownership or control structure.
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Seek Professional Guidance: If you’re unsure about your obligations under the CTA, consider consulting with a CPA or legal professional who can provide tailored advice and assistance.
Conclusion<
The BOI reporting requirements represent a significant shift in how businesses must disclose ownership information. While the goal is to increase transparency and reduce financial crime, the burden of compliance falls on small businesses and self-employed individuals. By staying informed and taking proactive steps to meet these requirements, you can avoid penalties and ensure your business remains in good standing.
If you have questions or need assistance with BOI reporting, our CPA firm is here to help. Contact us today< to schedule a consultation and ensure your business is fully compliant with the latest regulations.
George V. Famiglio, Jr, CPA/PFS, CFP, CFS, CGMA. Est. 1971
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