New BOI Reporting Rule – Information and Guidance

Dec 25, 2023

New BOI Reporting Rule – Information and Guidance

The new Beneficial Ownership Information (BOI) rule, implemented as part of the Corporate Transparency Act (CTA), requires certain companies to report their beneficial ownership information to the U.S. Department of the Treasury. This rule aims to enhance corporate transparency, protect national security, provide critical information to law enforcement, and promote financial transparency.

What does Beneficial Ownership Mean?

Beneficial ownership refers to the individuals who ultimately own or control a legal entity, such as a company. It includes individuals who directly or indirectly own 25% or more of the equity interests in the company or exercise substantial control over the company.

CTA requires companies to report BOI, which refers to getting information about people who own a company directly or indirectly. 

Beneficial Ownership Rule for LLC

According to this new rule, every company meeting the “reporting company” definition has to file a BOI report.

Limited Liability Companies (LLCs) are subject to the beneficial ownership reporting requirements under the new rule. The regulations are designed to minimize the burden on reporting companies, particularly small businesses. It will also help to ensure that the information collected is accurate, complete, and highly useful.

Is LLC exempt from filing BOI reports?

Fortunately, there exist about 23 exemptions. So, if your company falls under any of these categories, it will be exempt from filing a BOI report. However, most of the LLCs are not exempt from filing the BOI report. It is because they meet the criteria that require BOI reporting.

LLCs that are subject to filing reports to agencies like financial institutions, insurance companies, tax-exempt entities, and more won’t qualify for these exemptions.

Type of information LLC needs to provide in BOI report.

The report submitted to FinCEN for your company will include specific details about the company, such as its legal name, any trade names it operates under, its address, jurisdiction of formation, and taxpayer identification number.

Additionally, as an owner of a reporting company, it’s crucial to note that you will need to furnish personally identifiable information for each beneficial owner to FinCEN. A beneficial owner is defined as an individual who directly or indirectly exerts substantial control over a reporting company or owns or controls at least 25 percent of it.

For each beneficial owner of your company, you will be expected to provide their legal name, birthdate, residential address, and identification number from a driver’s license, state ID, or passport, as well as an image of the corresponding document.

Reporting companies formed after January 1, 2024, will also provide information about their company applicants.

When, where, and how does an LLC need to file its initial BOI report?

If you are the owner of a small business that needs to file a BOI report (as a “reporting company”), the filing period is from January 1, 2024, to January 1, 2025. For companies formed within this period, the report must be filed within 90 days of receiving notice of formation.

Companies formed after January 1, 2025, must file within 30 days of formation notice. The report will be submitted electronically to FinCEN through their website, with no filing fee. It is a federal filing, and no state filing is required.

What to do if the beneficial owners of the LLC change?

If there are changes in the beneficial owners of an LLC, the company must file an updated report with FinCEN. You need to file the updated report within 30 days of the change. It is essential to promptly and accurately report any changes to ensure compliance with the BOI reporting requirements.

What to do if there is an error in my LLC’s BOI report?

In case of an inaccurate statement in the BOI report filed for an LLC, you must file a corrected report must. You should file it with FinCEN within 30 days of when you discover the error in your BOI report.

What can I do if my LLC is eligible for exemption after filing the initial BOI report?

In that case, you can file an updated BOI report with FinCEN. Describe how your company is exempt from BOI reporting. It is important to adhere to the established processes to ensure compliance with the regulations.

Procedure to obtain a FinCEN identifier for LLC and its applicants.

Starting from January 1, 2024, you can submit applications for a FinCEN Identifier to FinCEN electronically. You can do so through the filing system on their website. The applicant must provide all necessary information and will need to submit an updated application within 30 days of any changes to their reported information.

What is the penalty for violating compliance?

The penalties for non-compliance with the beneficial ownership reporting requirement are significant. Violators may be subject to a civil penalty of up to $500 for each day the violation continues, as well as criminal fines of up to $10,000, imprisonment for up to two years, or both.

It’s important for small business owners to be aware of these penalties and ensure compliance to avoid the severe consequences imposed by the law.

Impact of Beneficial Ownership Reporting on Small Business Owners

The requirement for beneficial ownership reporting will have a substantial impact on many small business owners.

Small business owners will need to determine whether their company is obligated to file a report. They will be required to disclose the personal information of individuals who exert significant control and ownership over the company. This information will be stored in a database maintained by a federal agency, and ongoing updates will need to be filed when changes occur.

There are important decisions to consider, such as the timing of the report filing and whether to file directly or engage a third party for assistance. Addressing these issues will ensure preparedness for this significant new reporting obligation. Compliance will also help avoid the severe penalties imposed by the Corporate Transparency Act on non-compliant entities.

Final Thoughts

Overall, the new BOI rule and the reporting requirements are here to enhance transparency and prevent illegal activities. It is essential for LLCs and other reporting companies to understand and comply with these regulations. It will help them to fulfill their obligations and avoid potential penalties.

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