BOI Report: What is BOI report and why you need to file your BOI report in 2024

If you own or operate a business entity in the United States, you may have heard of the new beneficial ownership information (BOI) reporting rule that will take effect on January 1, 2024. This rule, which was enacted by the Corporate Transparency Act of 2021, requires certain types of entities to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The purpose of this rule is to enhance the transparency and accountability of the U.S. financial system and to prevent the misuse of entities for illicit activities such as money laundering, tax evasion, and terrorism financing.

But what exactly is a BOI report, who needs to file it, and how can you prepare for it? In this article, we will answer these questions and provide some useful tips and resources to help you comply with the BOI reporting rule.

What is a BOI report?

A BOI report is a form that contains information about an entity, its beneficial owners, and, in some cases, its company applicants. A beneficial owner is an individual who directly or indirectly owns or controls at least 25% of the ownership interests of the entity, or who exercises substantial control over the entity. A company applicant is an individual who files an application to form or register the entity under the laws of a state or Indian Tribe, or with a foreign government.

The information that must be reported in a BOI report includes:

• The name and type of the entity

• The entity identification number

• The mailing address and, if different, the physical address of the entity

• The date of formation or registration of the entity

• The state, Indian Tribe, or foreign country of formation or registration of the entity

• The name, date of birth, current residential or business street address, and unique identifying number (such as a passport number or driver’s license number) of each beneficial owner and company applicant

• A certification by the person submitting the report that the information is true, correct, and complete

Who needs to file a BOI report?

Not all entities are required to file a BOI report. The rule applies only to reporting companies, which are entities that are:

• Created by filing a document with a secretary of state or a similar office under the law of a state or Indian Tribe; or

• Formed under the law of a foreign country and registered to do business in the United States by filing a document with a secretary of state or a similar office under the law of a state or Indian Tribe.

However, there are many exemptions for reporting companies that meet certain criteria, such as having more than 20 full-time employees, more than $5 million in gross receipts or sales, or operating in a regulated industry. For a full list of exemptions, please refer to Chapter 1 of FinCEN’s Small Entity Compliance Guide.

How to file a BOI report?

The BOI reporting rule will become effective on January 1, 2024. Reporting companies will be able to file their BOI reports online using the BOI E-Filing System, which is a secure web-based platform that allows users to submit, view, and manage their reports. Users will need to create an account and follow the instructions on the website to complete and submit their reports.

The filing deadline for BOI reports depends on when the reporting company was created or registered. For existing entities that were created or registered before January 1, 2024, the deadline is December 31, 2024. For new entities that are created or registered on or after January 1, 2024, the deadline is 30 days after the date of formation or registration. Reporting companies must also update their BOI reports within one year of any change in the reported information.

There is no fee for filing a BOI report. However, failure to comply with the BOI reporting rule may result in civil and criminal penalties, including fines and imprisonment.

Tips and resources for BOI reporting:

BOI reporting may seem complicated and burdensome, but there are some steps you can take to make it easier and smoother. Here are some tips and resources to help you prepare for BOI reporting:

• Review the BOI reporting rule and guidance from FinCEN. You can find the final rule, the Small Entity Compliance Guide, the FAQs, the filing instructions, and other helpful information on FinCEN’s website. You can also subscribe to FinCEN’s email alerts to receive updates and notifications about BOI reporting.

• Determine if your entity is a reporting company or qualifies for an exemption. You can use the interactive flowcharts and checklists in Chapter 1 of FinCEN’s Small Entity Compliance Guide to help you with this step. If you are not sure, you may want to consult with a legal or tax professional for advice.

• Identify and verify your beneficial owners and company applicants. You can use the definitions and examples in Chapters 2 and 3 of FinCEN’s Small Entity Compliance Guide to help you with this step. You will need to collect and verify the personal information of each beneficial owner and company applicant, such as their name, date of birth, address, and identification number. You may also want to obtain their consent and inform them of the BOI reporting requirements and the potential uses and disclosures of their information by FinCEN and other authorized parties.

• Prepare and file your BOI report. You can use the form and instructions in Chapter 4 of FinCEN’s Small Entity Compliance Guide and on the BOI E-Filing System to help you with this step. You will need to enter the information of your entity, your beneficial owners, and your company applicants, and certify the accuracy and completeness of the report. You will also need to create a FinCEN ID, which is a unique identifier that you can use to protect your privacy and link your reports across different entities. You can choose to create a FinCEN ID for yourself and/or your beneficial owners and company applicants, or use the FinCEN IDs that they provide to you.

• Keep records and update your BOI report. You should keep records of the information and documents that you used to prepare and file your BOI report, such as the formation or registration documents of your entity, the identification documents of your beneficial owners and company applicants, and the confirmation receipt of your report. You should also monitor any changes in your entity, your beneficial owners, or your company applicants, and update your BOI report within one year of any change.

Conclusion

BOI reporting is a new and important requirement for many business entities in the United States. It aims to enhance the transparency and accountability of the U.S. financial system and to prevent the misuse of entities for illicit activities. By following the BOI reporting rule and guidance from FinCEN, and using the tips and resources provided in this article, you can comply with the BOI reporting rule and avoid penalties. If you have any questions or concerns about BOI reporting, please contact FinCEN or seek professional assistance.