Beneficial Ownership Information BOI Reporting: What Small Business Owners Need to Know

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If you have a Corporation or a LLC, this BOI rule applies to you. As of January 1, 2024, a new rule called “beneficial ownership information reporting” (BOI) will come into effect, and it will have implications for many small business owners. This rule requires certain businesses to submit their beneficial ownership information to the U.S. government through the Financial Crimes Enforcement Network (FinCEN).

Akron Income Tax Co wants you to understand that not following this rule could lead to serious punishments, like large fines or possibly going to prison.

Any domestic reporting company or foreign reporting company created or first registered in 2024 must file the initial filing deadline of the BOI report within 90 calendar days of the date on which it receives actual or public notice that its creation has become effective.

This article will dive into the key aspects of the final rule on beneficial ownership information reporting and help small business owners understand their responsibilities. We will discuss who must report under this rule, what constitutes a beneficial owner, the reporting requirements, deadlines, penalties for noncompliance, and steps to prepare your business for compliance.

We offer more services other than tax preparation services and small business tax filings. Call us at 330-733-1040 for any questions about filing this report. We can assist you in getting this completed.

Understanding Beneficial Ownership Information Reporting

Beneficial ownership information includes identifying info, such as the names of individuals who own or control a business. The BOI rule says that some people in certain businesses must file a BOI report to FinCEN (a part of the U.S. Treasury) certain details. They do this to stop bad people from doing illegal stuff. But if small business owners don’t know or understand these rules, they might get in trouble and have to pay massive fines.

Determining if the Beneficial Ownership Rule Applies to Your Business

Under the beneficial ownership information rule, a “reporting company” must report general information and beneficial owner information. To determine if the rule applies to your business, you need first to establish if your business falls under the classification of a domestic reporting company. If it does, you must then identify all your beneficial owners, including investment companies and regulated public utilities. There may be an additional burden completing this report.

What is a Reporting Company?

Reporting companies include domestic companies and foreign entities that must follow the beneficial ownership rule. Domestic companies are just American businesses set up as corporations, Limited Liability Companies (LLCs), or other types of companies by filling out paperwork with a state office like the secretary of state or a similar office. Foreign entities encompass companies formed under the law of a foreign country that were created by filing a document to do business in the U.S. These foreign entities must also provide information about their place of business, the state or tribal jurisdiction of formation, and their IRS Taxpayer Identification Number (TIN). For a foreign reporting company, the state or tribal jurisdiction of formation would be the foreign jurisdiction where the company first registers, and the IRS Taxpayer Identification Number (TIN) will be a tax identification number issued by that foreign jurisdiction.

It’s important to note that not all companies are subject to the BOI reporting requirements. There are exemptions for various types of businesses, including accounting firms, tax-exempt organizations, large operating companies, insurance companies, and inactive entities. Each exemption has specific rules and criteria. For a comprehensive list of reporting beneficial ownership information exemptions, consult United States FinCEN’s Small Entity Compliance Guide.

Who is a Beneficial Owner?

beneficial owner is an individual who directly or indirectly exercises “substantial control” over a company or owns or controls at least a quarter (25%) of the company. Examples of individuals who exercise substantial control include senior officers, appointment or removal authorities, and important decision-makers. You don’t have to “own” stock or ownership in a company to be a “Beneficial Owner”. On the other hand, people who own or control 25% or more of the company might do this through owning shares of stock, having voting power, or having a big stake in the company’s profits or value.

There are certain individuals who are not considered beneficial owners and do not need to be reported, such as minor children, nominees, intermediaries, custodians, agents, employees, inheritors, and creditors. However, it’s important to review FinCEN’s guidelines on beneficial owner information exemptions for more specific information.

Who is Considered a Company Applicant?

Company Applicants are individuals who directly file the document that creates or registers the Reporting Company. If more than one person is involved in the filing. The individual primarily responsible for directing or controlling the filing is also considered a Company Applicant. Company Applicants must be individuals and not companies or legal entities.

Accountants and lawyers may be considered Company Applicants if they directly filed the creation or registration document or if they are primarily responsible for directing or controlling the filing process.

Beneficial Ownership Reporting Requirements

If your business falls under the beneficial ownership reporting requirements, it’s crucial to understand the deadlines and the information you need to report. The reporting requirements vary depending on when your business was created or registered and the types of entities that were created.

Companies Created/Registered Before January 1, 2024

If your business was created or registered before January 1, 2024, you must file the initial BOI report by January 1, 2025. The report should include the reporting company information, beneficial owner information, and any other required details.

New Companies Created/Registered After January 1, 2024

For new companies created or registered after January 1, 2024, the deadline for filing the initial BOI report is within 90 days of receiving notice that your registration is effective. FinCEN extended the original 30-day deadline to 90 days to provide businesses with ample time to comply.

Companies Created/Registered on or After January 1, 2025

If your company starts or gets registered on or after January 1, 2025, you have to file the first BOI report within 30 days after you’re told that your registration is official.

It’s important to note that the portal to submit the report will only open on January 1, 2024. Additionally, you should not file the BOI report annually. Only file the initial report unless you need to correct or update any information.t

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