Introduction to Beneficial Ownership Information Reporting

In an effort to combat financial crimes and enhance transparency, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has implemented new requirements for companies operating within the United States. These mandates, known as beneficial ownership information reporting aka BOI reporting established under the Corporate Transparency Act of 2021, necessitate that many businesses disclose information about their beneficial owners. This article integrates and paraphrases two key documents regarding this new reporting requirement, providing a comprehensive guide for business owners.

Launch of the Beneficial Ownership Registry

The introduction of the U.S. beneficial ownership registry marks a significant advancement in safeguarding the nation’s economic and national security. As Secretary of the Treasury Janet L. Yellen noted, corporate anonymity has historically enabled a range of illicit activities, including money laundering, drug trafficking, terrorism, and corruption. These activities not only harm American citizens but also place law-abiding small businesses at a competitive disadvantage. The establishment of a centralized database for beneficial ownership information is intended to address these vulnerabilities within the financial system.

Compliance Deadlines and Requirements

Initial Filing Deadlines

Filing beneficial ownership information is straightforward, secure, and free. The deadlines for initial reports vary based on the date of a company’s formation:

  • Existing Companies: Entities created or registered before January 1, 2024, must file by January 1, 2025.
  • Newly Created Companies: Entities formed or registered in 2024 must file within 90 days of receiving notice of their effective registration.

Information Required for Reporting

Businesses required to report must provide specific details about each beneficial owner, including:

  • Name
  • Date of birth
  • Address
  • An identifying number and issuer from a non-expired U.S. driver’s license, passport, or state-issued identification document. If none of these are available, a non-expired foreign passport can be used. An image of the identification document must also be submitted.
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Additionally, the company must submit information about itself, such as its name and address. For companies created on or after January 1, 2024, information about the individuals who formed the company (referred to as “company applicants”) must also be reported.

Ongoing Reporting Obligations

Unlike annual requirements, beneficial ownership information only needs to be submitted once, unless updates or corrections are necessary. This reduces the burden on businesses, ensuring that they only provide new information as changes occur.

Support for Small Businesses

FinCEN is dedicated to assisting small businesses with compliance. The Small Entity Compliance Guide offers plain language instructions to help businesses understand and meet their reporting obligations. Additional resources, including informational videos, webinars, FAQs, and contact center support, are available on the FinCEN website.

Importance of Beneficial Ownership Information (BOI) Reporting

The Goal of BOI Reporting

The primary objective of BOI reporting is to help the Treasury detect and establish a performance improvement plan. This initiative aims to distinguish between legitimate small business owners and those involved in illicit activities such as money laundering, drug trafficking, and terrorism.

The Ease of BOI Reporting

Completing the BOI report is a relatively quick process, often taking only a few minutes. The required information is minimal, making the task less daunting than filing taxes. However, business owners should not underestimate the importance of this new requirement.

Financial Housekeeping Around BOI Reporting

Filing the BOI report presents an opportunity for businesses to perform other financial tasks that can improve their operations and financial health.

Ensuring Accurate Business Filings

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Business owners should use the BOI reporting process as an occasion to verify that all their business filings are current and accurate. This includes confirming that the business’s mailing address and registered agent information are correct and updating any outdated or irrelevant details with the relevant state or business regulatory agency.

Setting Up a Business Savings Account

Many business owners leave excess cash in checking accounts where it earns minimal interest. Completing the BOI report is a good time to transfer these funds to a business savings account that offers higher interest rates, potentially up to 4.00% APY.

Considering a New Business Credit Card

While not directly related to BOI reporting, applying for a new business credit card can provide benefits such as rewards points and tax-deductible expenses. This financial task, prompted by the BOI reporting process, can lead to better financial management and perks for the business.

Conclusion

The new BOI reporting requirements are a critical step toward greater financial transparency and security in the United States. Business owners must comply with these requirements to help combat financial crimes and ensure their operations remain lawful. By meeting the deadlines and accurately reporting beneficial ownership information, businesses can also take the opportunity to tidy up their financial records and explore additional financial management options. Completing the BOI report is a quick and essential task that supports the broader goal of protecting the integrity of the U.S. financial system.