Why does FinCEN need a BOI report? Could the purpose of BOI reporting be so great that businesses across the USA have to file yet another report with the government?
That’s the question many business owners have been asking since the Corporate Transparency Act of 2021 enacted the Beneficial Ownership Information Reporting Rule, which went into effect in January 2024.
The purpose of the BOI report is to inform the federal government about the real people who ultimately own or control businesses.
The greater purpose of the BOI report is to help identify and safeguard against:
- Tax evasion
- Money laundering
- Terrorism
- Drug trafficking
- Human trafficking
- And many other crimes
Sometimes, criminals find ways to hide behind business entities to carry out transactions associated with illegal activities. It is believed these criminal activities can be better detected and reduced if the federal government requires businesses to provide details about their beneficial owners (any individuals who own or control at least 25% of the company’s ownership interests and/or who have substantial control over the business).
Companies created on or after January 1, 2024, must also share information about their company applicant(s), the person who directly filed the entity’s formation documents and (if applicable) the individual who directed or controlled the formation filing.
Most domestic and foreign businesses operating in the United States are considered “reporting companies,” and therefore must file a BOI report, although some exceptions exist.
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BOI Reporting is Designed to Help Protect You
It is harder for wrongdoers to commit criminal activity through shell companies and other nebulous ownership structures when accurate data about businesses’ beneficial owners is available. So, while filing a BOI report may seem like a pointless inconvenience, it does have an honorable purpose and it is to help protect you.
FinCEN has assured business owners that the beneficial ownership information they collect will be stored in a secure, non-public database using rigorous information security methods and controls. Also, the bureau says it will only share the information with those authorized to access it for authorized purposes, working with those parties to ensure they understand their roles and responsibilities in using, handling, and protecting the security and confidentiality of the reported information.
The Deadline is Quickly Approaching
If a business meets the definition of a reporting company and does not match the criteria within one of the 23 exemption categories, it must report information about its beneficial owners and company applicant(s) by the required deadline, which depends on when the entity was created.
BOI reporting due dates include:
- Existing Companies – Reporting companies created or registered to do business before January 1, 2024, must file their initial BOI report by January 1, 2025.
- New Companies Formed in 2024 – Reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, must file their initial BOI report within 90 days of the entity’s formation.
- New Companies Formed in 2025 or After – Reporting companies created or registered on or after January 1, 2025, must file their initial BOI report within 30 days of the entity’s formation.
The potential penalties for failing to file a BOI report are substantial. A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $591 for each day that the violation continues. And this amount can increase because the civil penalty amount gets adjusted annually for inflation. There could also be criminal penalties of up to two years imprisonment and a fine of up to $10,000.
More BOI Resources
If you’re unsure about whether your business is a reporting company or who qualifies as beneficial owners of your business, contact your attorney or accountant for guidance.
In the meantime, please continue to explore educational information our team has created to help:
- What Is a BOI Report and Do You Need to File One?
- Consequences of Not Filing a BOI Report
- Company Applicant vs. Beneficial Owner
- BOI Reporting Requirements by Entity Type
- Do Inactive Entities Need to File a BOI Report?
- Beneficial Ownership Information Reporting Services
The filing deadline for business entities formed before 2024 is quickly approaching. Let CorpNet handle your BOI filing so you can sleep better at night knowing you’ve complied with this critical compliance requirement.
