Navigating the New BOI Reporting Law: A Must Read Breakdown for all Small Businesses

Ready to prepare your business for the coming changes in financial reporting regulations? Brace yourself as a new BOI Reporting Law is impending, mercilessly hitting your wallet with a whopping $500 PER DAY penalty if you don’t appropriately act. Starting January 1, 2024, this game-changing law could potentially threaten your financial standing, and even your freedom, triggering hefty fines, or worse – jail time, for non-compliance. Fortunately, we are here to guide your business through the maze of this regulation in a comprehensive video breakdown.

Understanding the New BOI Reporting Law

The Beneficial Ownership Information (BOI) Reporting Law is a new regulation set to come into effect in 2024. Understanding it is crucial for every owner of an LLC or Corporation, as it increases transparency in the ownership of corporate entities. The law mandates the annual filiation of a disclosure report providing information about your company and its owners to the government.

Overview of the BOI Reporting Law

This new law requires every LLC or Corporation to submit an annual report that unveils key information about the company and its owners. The law is designed to increase corporate transparency, especially with regards to ownership and financial details.

Implications for LLCs and Corporations

The implications for LLCs and corporations are profound, given the regulatory standards that need to be met. Every entity, regardless of its size, must comply. They need to submit an annual report that details the institution’s ownership information. Such information can paint a clear picture of who controls the entity, which could affect business operations, decision-making processes, and the way corporate affairs are managed.

Penalties for Non-compliance

Non-compliance with this new law can lead to severe penalties. For one, the defaulting business could face penalties of up to $500 per day. Furthermore, key stakeholders may face up to two years of incarceration, and fines up to $10,000 may be imposed. Hence, compliance is absolutely paramount.

Who is Subject to the BOI Reporting Law

Comprehending who is obliged to submit to the BOI Reporting Law is critical. This way, one can avoid non-compliance and it’s associated penalties.

Criteria for Entities Required to File

Every LLC and Corporation formed and registered with their states are obligated to file. This applies even to those entities that registered before the law was enacted. The central idea is that if your business is recognized as an independent entity, you must file the BOI report.

Exclusions and Exemptions

While the law is comprehensive, certain entities are exempt. For instance, if your business operates as a sole proprietorship or a general partnership, BOI reporting isn’t required. Also, tax-exempt entities, such as public accounting firms, banks, and certain other categories, are considered exempt.

Impact on Inactive or Old LLCs

Interestingly, the law has a separate provision for old or inactive LLCs. For your entity to be deemed inactive and thus exempted from filing the BOI report, it must satisfy six criteria. The criteria include not being owned by a foreign person, not having an ownership change in the last 12 months, and not having sent or received funds greater than $11,000, among others. Those that fail to meet these criteria must file the BOI report.

What Owners Need to be Reported

The law clearly spells out which owners in your organization need to be reported.

Owner Criteria for Reporting

Typically, any person who owns at least 25% of the entity must be reported. However, the clause on substantial control further stipulates that even if a person owns less than 25% of the company, their details must still be reported if it is deemed that they exercise substantial control over the company.

Determining Substantial Control

Determining substantial control could be a bit subjective but there are guidelines to indicate such. If a person possesses senior officer status (for instance, they are the CEO or CFO), have authority to appoint or remove senior officers, make vital company decisions, or influence the company in any other significant way, they are deemed to be in substantial control.

Implications for Minority Owners

Substantial control could also extend to minority owners who, despite owning less than 25%, still exert considerable influence on the entity. The law requires that their details be reported as well. Hence, being a minority owner does not automatically grant you an exemption.

Key Information Needed in a BOI Report

When filing a BOI report, there is certain information that must be included.

Information about the Entity

The BOI report must include the entity’s legal name, address, and IRS or Tax Identification Number.

Details of Beneficial Owners

The full legal name, birth date, current address, and identification number (from a passport, driver’s license, or another government-issued document) of each beneficial owner must be reported.

Proof of Identification Required

Proof of identification is required to ascertain the information on the beneficial owners. This can be a driver’s license, passport, or any form of a government-issued document.

Deadlines for BOI Report Submission

The deadlines for BOI report submission have been clearly stipulated by the law.

Deadlines Based on Entity Creation Date

For entities created before January 1st, 2024, the initial BOI report must be submitted by January 1st, 2025.

Deadline for Newly Created Entities

For entities created after January 1st, 2024, the deadline is 90 days after the formation of the entity.

Future Changes in Deadlines

For entities registered in 2025 and beyond, the time frame shortens. They must file their initial report within 30 days of their registration.

Process for Filing a BOI Report

Submitting a BOI report involves several steps.

How to Submit a BOI Report Online

You must visit the BOI reporting website (fincen.gov booi) and follow the prompts to submit the report online.

Assistance and Guidance Available

At fincen.gov booi you will find additional information and guidance to help you complete the BOI report, boosting your confidence in the process.

Involving Professionals in Submission Process

While the process is designed to be user-friendly, you may wish to involve a professional, particularly if there are complexities to your report or uncertainty in your understanding.

Addressing Changes in Previously Submitted Information

Changes to any previously submitted information need to be appropriately handled for compliance.

What Constitutes a Change in Information

This ranges from changing your business address to the entrance of a new business partner and other changes that would typically alter the previously reported information.

Deadline for Reporting Changes

You are required to report these changes within 30 days after they occur.

Implications for Changes in Ownership

Declaring changes in ownership is crucial as new stakeholders or a change in the degree of control by an existing stakeholder must be accounted for to keep your BOI report up to date.

Risks Associated with Non-compliance

It is crucial to note that non-compliance with the BOI reporting law could have far-reaching implications.

Potential Financial Penalties

The financial implications for non-compliance are significant. A daily fine of up to $500 could be levied against your entity for every day of non-compliance.

Risk of Incarceration

In addition to financial ramifications, non-compliance could lead to a jail term of up to 2 years.

Changes in Future Enforcement

While it is expected that the initial enforcement of the law might be somewhat lenient due to it being a new concept, companies need to understand that law enforcement’s focus and intensity could change in the future.

Best Practices for BOI Reporting Compliance

This article would be incomplete without tips and a guide to help ensure your compliance with the BOI reporting law.

Regular Review of BOI Reporting Requirements

You should regularly review the BOI reporting requirements to stay abreast of any changes or updates to the law.

Keeping Records of Submitted Reports

Maintain a comprehensive record of all the BOI reports you have submitted. This will enable you to track your compliance and provide reference materials for future reports.

Getting Professional Guidance

Consider seeking professional guidance to understand how to stay compliant effectively. They are well-versed in the law and can guide you on the nuances of the BOI reporting.

Conclusion

The BOI reporting law is a leap towards improving the transparency of corporate entities. Thus, all LLCs and corporations must adjust their reporting structures to accommodate the BOI requirements. The financial penalties, risk of incarceration and other non-compliance ramifications further highlight the gravity of this. It’s important to submit your BOI report and maintain good standing with the law. Lastly, don’t forget to document your BOI reporting process and seek professional guidance where needed. Being compliant with the BOI report law is a significant step in maintaining your company’s reputation and preventing legal complications in the future.

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