What is BOI?

BOI, or Beneficial Ownership Information, is useful information about everyone who is involved in controlling a company and its assets. It helps you stay transparent, comply with all the laws, and track any possible crime.

If your company is registered with the state, you are legally obligated to file BOI. Not sure where to start? Don't worry - we're here to explain it all! You will learn how to file BOI, when the filing is due, and what happens when you don't file it correctly.

We'll go over the most common BOI filing mistakes and show you how to avoid them. After that, we'll share some helpful tax tips and strategies to give you a better understanding of this topic. So, let's start from the very beginning.

What Does BOI Stand For?

BOI stands for Beneficial Ownership Information. It refers to details about individuals who directly or indirectly own or control a company. This information identifies the people who have significant influence over a business.

BOI is collected to increase transparency to prevent illegal activities such as money laundering or fraud. If you are involved with a company, you must understand BOI if you want to comply with reporting requirements.

This term is often used in accounting, legal, and regulatory contexts. The information typically includes the names, addresses, and ownership percentages of beneficial owners.

Why is BOI Important?

BOI is important because it helps identify the people who have real control over a business. This information increases transparency and ensures that businesses are operating in a fair and legal manner.

By requiring companies to disclose their beneficial owners, regulators can prevent illegal activities such as tax evasion, money laundering, and fraud. It also helps law enforcement track financial crimes and hold responsible parties accountable.

For you, BOI reporting ensures that your company complies with the law and avoids penalties for non-compliance. It provides a clear record of who owns or controls the company, which can protect your reputation and improve trust with clients, investors, and regulators.

Who Needs to File BOI?

Corporations, limited liability companies (LLCs), and other similar entities need to file BOI. If you own or manage a company that is registered with the state, you are likely required to provide BOI.

This requirement applies to both newly formed businesses and existing ones. The goal is to identify individuals who have significant control over the company or own at least a certain percentage of it, usually 25% or more. This could include founders, major investors, or anyone with decision-making authority.

Certain entities, like banks, nonprofits, and government-owned organizations, may be exempt from BOI filing requirements. However, most privately owned businesses are required to comply.

When Is BOI Filing Due?

BOI filing is due based on when your company was created or registered. If your company was formed in 2024, you have 90 days from the date of its creation to submit the BOI report. For companies created before 2024, the deadline to file is January 1, 2025.

For businesses founded or registered on or after January 1, 2025, the filing deadline is shorter. These companies must submit their BOI report within 30 calendar days of their registration date.

This means you should plan to gather all necessary ownership information as soon as your business is formed or registered. Missing the deadline can result in various consequences.

What Happens If You Don't File BOI?

If you don't file BOI, you could be facing serious penalties, including financial fines and legal action (civil penalties, criminal charges, business license revocation, and court orders).

Regulatory authorities take non-compliance seriously and may impose daily fines for every day your BOI report is late. These fines can quickly grow into a significant financial burden.

Authorities may take action against your business, which could result in lawsuits or other enforcement measures. In some cases, this could jeopardize your ability to maintain your business license, forcing you to halt operations.

Banks and financial institutions often require proof of BOI compliance. Without it, you might struggle to open new accounts or secure loans, which could limit your growth.

Furthermore, failing to meet BOI requirements could damage your reputation with clients, investors, and partners. You may even face audits or investigations that require time and resources to resolve.

What Are Common BOI Filing Mistakes to Avoid?

Common BOI filing mistakes to avoid are providing incomplete information, not updating changes, relying on outdated records, ignoring legal requirements, and overlooking small ownership stakes.

Below, we will break down each mistake and discuss how to avoid them.

Providing Incomplete Information

If you fail to include all required details about your beneficial owners, your filing may be rejected. Missing information, such as full legal names, addresses, or ownership percentages, creates gaps in transparency.

Be sure to double-check the filing requirements before submission. Create a checklist of all necessary details to ensure nothing is missed. Review your records thoroughly and confirm the accuracy of each piece of information.

Not Updating Changes

BOI filings must reflect the current ownership structure of your business. If a beneficial owner is added, removed, or changes their ownership stake, this must be updated promptly.

You should set up a process for tracking changes in ownership or control. Assign someone in your organization to monitor and report updates regularly.

Additionally, familiarize yourself with the deadlines for reporting changes, as delays can lead to penalties. If changes occur, submit the updated BOI as soon as you can.

Relying on Outdated Records

If you submit information that no longer reflects your company's current ownership structure, your filing could be deemed invalid. This might happen if you use old documents that haven't been updated to include recent changes.

That's why you need to check if the data matches your current ownership structure and any legal requirements. Before filing, cross-check your records against official documentation, such as shareholder agreements or corporate filings.

Ignoring Legal Requirements

Every business is subject to specific rules about what must be filed and when. Therefore, it's best to educate yourself on the BOI laws that apply to your business.

Take the time to understand what information needs to be filed and ensure you meet all deadlines. Working with a legal professional can greatly help you here. Also, keep track of any changes in regulations that might affect your filings.

Overlooking Small Ownership Stakes

Even individuals with minor stakes may need to be reported, depending on the regulations in your jurisdiction. However, it's important to note that you don't necessarily have to be an owner to be listed as a beneficial owner.

Individuals or entities that exercise significant control or influence over the business - such as executives, directors, or certain creditors - may also qualify as BOs under the relevant laws.

To avoid this mistake, review the ownership structure and control dynamics of your business thoroughly. Pay attention to any individual or entity that holds an interest, even if it seems insignificant. Check the reporting requirements in your local BOI laws, as these rules determine which individuals must be included.

What Tax Tips and Strategies Can Help Small Businesses File BOI?

Tax tips and strategies that can help small businesses file BOI include understanding the requirements, gathering accurate information, organizing records, consulting experts, staying informed about regulations, and meeting filing deadlines.

First, it's important to understand who qualifies as a beneficial owner. Once you know this, identify the individuals' details that need to be reported. This includes their full legal name, residential address, date of birth, and identification document number.

Organizing your records is equally essential. Keep all ownership details securely documented. This not only helps with BOI filing but also supports future compliance needs.

Stay updated on any changes to BOI regulations. File your BOI report on time to avoid penalties and stay in good standing with regulatory authorities.

Consulting with professionals, such as accountants or legal advisors, provides clarity on BOI requirements. They can guide you through the process and offer valuable small business tax tips to ensure compliance at all times.

How Does BOI Reporting Work?

BOI reporting works by requiring businesses to provide detailed information about their beneficial owners. To complete the BOI reporting process, you must collect precise ownership details, submit them to the relevant authority, and update the records as needed.

First, gather all the details of the beneficial owners we've mentioned above (full names, residential addresses, etc). Once you have the required information, submit it through the designated reporting platform.

This ensures that the authorities have access to your business's ownership structure. Any errors in reporting can lead to serious issues, as penalties for BOI reporting mistakes can include various fines or other consequences. Always double-check your submission.

What Should You Do to Prepare for BOI Compliance?

To prepare for BOI compliance, you should determine if your company qualifies as a reporting company, check for exemptions, list beneficial owners, gather required information, and ensure all details are ready for timely submission through FinCEN's filing system.

A reporting company is any entity that meets the criteria set by FinCEN and is not exempt. This includes most corporations and LLCs, whether domestic or foreign.

Next, check for exemptions. Some entities, like certain large operating companies and regulated financial institutions, are not required to file. Understanding if your company qualifies for an exemption is essential.

Gather all required information about your company and its beneficial owners. Finally, all details must be organized and ready for submission through FinCEN's secure filing system by the specified deadlines.

Remember to stay informed and double-check everything. And when it comes to the parts you can't or don't want to handle alone - let us do it for you! Our team of experienced accountants is here to guide you every step of the way, ensuring your compliance is accurate and completely stress-free.

Important Note:

As of now, the FinCEN requirement to file Beneficial Ownership Information (BOI) has been temporarily stayed due to a lawsuit out of Texas. For more details, please read the latest BOI regulations. We will update this information as new developments arise.