Understanding Real Estate Investors, Professionals, and Dealers: Exploring the Key Differences
June 28, 2023
What is a BOI Report? The newest cost of running a business.
Starting 2024, many businesses will need to file a BOI Report.
Failing to file on time could result in penalties of $500 per day.
So what is a BOI Report?
A Beneficial Ownership Information (BOI) Report is a new requirement for businesses managed by FinCEN - the government agency responsible for enforcing financial crimes. The report requires "beneficial owners" to give the government information such as date of birth, home address, and an active ID (e.g. passport or driver's license).
Congress created the new requirement when they passed the Corporate Transparency Act (signed into law on January 1, 2021) to track who ultimately owns a business. The reason? To catch Russian Oligarchs and foreign terrorists using holding companies to funnel money from the US. The reality is that much of the burden falls on average business owners - and raises the cost of running a business.
Failing to file a BOI report on time could lead to penalties of up to $500 per day. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.
We're responding by restructuring the way we help our clients manage corporate compliance. If you would like our firm to help you stay compliant with BOI, reach out to us at admin@bpacpas.com.
Who needs to file?
All businesses that qualify as a reporting company are required to file BOI reports. A company is considered a reporting company if a document was filed with the secretary of state (SOS) or similar office to create or register the entity. Corporations (including S corporations), LLCs, and other business formed by filing documentation with the state must file. This includes LLCs formed to hold rental properties or even for a side hustle.
Because sole proprietorships, trusts, and general partnerships do not require the filing of a formal document with the SOS, they generally are not considered a reporting company and will not have a filing requirement.
Who is exempt?
Some companies are exempt from reporting, but many of the exempted companies are already required to report ownership information to a governmental authority. If you think you might be exempt, you should do careful research into the reporting requirements and consider consulting your lawyer. Each category has specific requirements. Here are some of the most common exemptions.
- Large operating companies with 20+ full-time US employees, a physical office in the US, and $5m+ of US sales reported on its prior tax return.
- Investment Companies and Advisers
- State-licensed Insurance Companies and Producers
- Tax-Exempt Entities
- Inactive Entities
Who is a Beneficial Owner
Two groups of individuals are considered beneficial owners: (1) any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company; or (2) any individual who exercises substantial control over the reporting company.
Individuals with substantial control are those with substantial influence over important decisions about a reporting company's business, finances, and structure. There is no requirement that these individuals have actual ownership in the company. These include:
- Senior officers (president, CFO, general counsel, CEO, COO, etc),
- Board Members, and
- Individuals with the authority to appoint or remove senior officers and board members.
When is my BOI Report Due?
A reporting company created or registered to do business before January 1, 2024 will have 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, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 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.
In addition to filing an initial BOI report, reporting companies must also filed an Updated BOI Report when information changes. This includes address changes, an expired driver's license, and changes in ownership or officers. These updated reports are due within 30 days after the change occurs.
How do I file a BOI Report?
Hand It Off to BPA Compliance
Paperwork is a hassle. Getting it wrong becomes a problem. Hand off your BOI Reporting to our team. Contact us at admin@bpacpas.com to get started.
DIY Filing
FinCEN has promised to make BOI Reporting understandable for the average man. While it doesn't seem so simple to us, you can file your BOI yourself. Before you do, we recommend that you learn more from FinCEN and read their Small Business Compliance Guide.
Call Your Lawyer
If your situation may be more complex or if you are unsure whether you need to file, we recommend that you contact your legal counsel - sooner than later.
