What is beneficial ownership reporting?
Effective January 1, 2024, the Corporate Transparency Act (CTA) requires certain entities, including many small businesses, to report information about beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A beneficial owner is generally any individual who directly or indirectly owns or controls a certain percentage (often 25% or more) of the company or has significant influence over the business’s decisions.
Beneficial Ownership Interest Reporting (BOIR) is often mandated by law to enhance transparency regarding who truly owns or controls a business, prevent fraud, and combat financial crimes such as money laundering and tax evasion.
How long does a company have to submit BOIR?
A reporting company created or registered to do business before January 1, 2024, has until January 1, 2025, to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, has 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. Reporting companies created or registered on or after January 1, 2025, has 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
How to report BOIR?
A company’s beneficial ownership information needs to be reported to FinCEN. This can be done so electronically through a secure filing system available via FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov). The form to report can also be found by going to FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov) and select “File BOIR.”
What happens if you fail to report?
Failing to comply with BOIR requirements can lead to significant fines and legal consequences. A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 each day the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of this time, this amount is $591.
A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
Understanding and complying with BOIR is essential for small businesses to avoid penalties and contribute to a transparent financial system.