FinCEN's BOI Reporting: What Small Businesses Need to Know

The Beneficial Ownership Information (BOI) Reporting Rule, enacted under the Corporate Transparency Act (CTA), has sparked confusion and concern among small business owners across the nation. This rule mandates that certain businesses disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). With potential financial and even criminal penalties for non-compliance, understanding these requirements is crucial for all small business owners.

Who Must File a BOI Report with FinCEN?

The BOI reporting requirement took effect on January 1, 2024, and applies to both domestic and foreign businesses classified as "reporting companies" by FinCEN.

• A reporting company is defined as a corporation, limited liability company (LLC), or other entity formed under state or tribal law, including those registered to do business in a U.S. state or tribal jurisdiction.
• Sole proprietorships and general partnerships are exempt from BOI reporting as they are not registered legal entities.
• FinCEN has also outlined 23 types of companies that qualify for an exemption from the reporting rule. These include, for example, non-profits, public corporations, and certain types of financial institutions.
• It is highly recommended that business owners consult with an attorney if they have any doubts about whether their company is required to file a BOI report.

Understanding FinCEN's Reporting Requirements

Businesses classified as "reporting companies" must disclose information about their beneficial owners and company applicants. This includes:

• The name, date of birth, address, and identification number of each beneficial owner.
• The name and address of the company applicant.

Reporting deadlines vary depending on when the business was formed:

Reporting Company Type	Initial BOI Report Deadline
Existing reporting companies created before January 1, 2024	January 1, 2025
New reporting companies formed between January 1, 2024, and January 1, 2025	Within 90 days of formation
New reporting companies formed on or after January 1, 2025	Within 30 days of formation

Potential Penalties for Non-Compliance with FinCEN's Regulations

Failure to comply with FinCEN's BOI reporting requirements can lead to significant consequences:

• Civil Penalties: Up to $591 per day for each day a violation continues, with a maximum of $10,000.
• Criminal Penalties: Up to two years in prison for willfully providing false or fraudulent information or failing to file a complete or updated BOI report.

Efforts to Repeal the Corporate Transparency Act

Several organizations, including the National Federation of Independent Business and the Small Business & Entrepreneurship Council, are advocating for the repeal of the CTA, arguing that it represents excessive government oversight.

• Congressman Warren Davidson (R-OH) introduced HR 8147 in April 2024, and Senator Tommy Tuberville introduced S 4297 in May 2024, both aiming to overturn the law.
• It remains uncertain whether these bills will be passed in the Senate and House, or if the President would approve them.

What Should Small Business Owners Do?

The uncertainty surrounding the CTA's future makes it difficult for businesses to determine their best course of action. While some may choose to wait and see if the law is repealed, it's essential to consider the potential risks of non-compliance.

• Gathering the necessary information for a BOI report may take several weeks, so delaying the process could lead to missing deadlines and potential penalties.
• FinCEN provides a secure electronic filing system, the BOI E-Filing System, which is relatively easy to use.
• Consulting with an attorney is highly recommended to understand the specific requirements and potential consequences for your business.

Key Takeaways

The BOI Reporting Rule under the Corporate Transparency Act presents a significant challenge for many small businesses. While the law faces potential repeal, it is crucial for business owners to stay informed about the current requirements and deadlines. By understanding the potential penalties for non-compliance and exploring the options available to them, small businesses can navigate this evolving landscape effectively and protect their operations.