Small business owners, the federal government wants your BOI

Millions of US small businesses haven't completed their anti-money laundering disclosures as the deadline draws near.

Here's what you need to know.

First, if you’ve never heard of a BOI report or aren’t sure if you need to file it, these fast facts should clear things up.?

What is BOI??

A form small businesses must file with the federal government’s Financial Crimes Enforcement Network on or before January 1, 2025.?

Who has to file??

Small business entities such as S- or C-corporations, limited partnerships, and LLCs, formed or authorized to do business through a state’s registration processes.?

What information must be included in a BOI filing??

The BOI filing must include the name, tax number and other identifying information about the reporting company and the names and unique identifiers along with proof of identity for all individuals who directly or indirectly own or control 25% or more of the ownership interest in the entity.?

When is the filing deadline for this report??

Covered businesses formed in 2024 have up to 90 days following registration to file the report. Other covered businesses must file on or before January 1, 2025.

Why should you care???

Penalties for non-compliance include up to $591* per day in fines to a maximum of $10,000, and up to two years in prison. Penalties for false or unauthorized filings are greater.?

*In January 2024, the amount increased from $500 to $591 following an annual adjustment for inflation.

Where to file your report??

Meet your BOI obligations by filling out an online form or uploading a pdf at the Financial Crimes Enforcement Network website. Businesses hoping to file using system-to-system API will have to speak to a FinCEN representative to get the details.?

Now, if you’d like to know a little bit more about what’s going on and why, these next sections are for you.?

Why is this BOI thing happening??

In 2021, Congress passed the US Corporate Transparency Act (CTA) , aimed at closing down money laundering schemes. The CTA and its provisions were part of the Anti-Money Laundering Act of 2020 (which was wrapped into the National Defense Authorization Act for Fiscal Year 2021).

The act created the US Beneficial Ownership Information Registry to be managed by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and requires small business entities to file a beneficial ownership disclosure report (a BOI report) with the registry.?

The registry’s stated purpose is to consolidate information about business entities formed at and regulated by the individual states, revealing their direct and beneficial ownerships and control.?

Although Congress enacted the law in 2021, the registry did not begin accepting filings until January 1, 2024. The US Treasury needed time to set up the processes for filing and managing the expected influx of data.?

During the registry’s initial phase-in in 2024, newly formed organizations were given 90-days after the registration of their business entity to file their beneficial ownership information (the BOI report) with FinCEN.

Its requirements apply to any domestic business created through registration with a state and some foreign entities registering to do business in the US. That’s approximately 32 million small businesses, including mine, a one-person LLC.?

Covered businesses (referred to as “reporting companies” FinCEN) formed prior to January 1, 2024 have until January 1, 2025 to get their BOIs in order.?

Who doesn’t the BOI report rule cover??

The CTA specifically excludes federally regulated business entities and large businesses (organizations with an active US presence having at least 20 full-time employees and more than $5 million in annual gross receipts) from the beneficial ownership reporting requirements.?

Small businesses that have been inactive for several years and those that were members of the National Small Business Association (NSBA) as of March 1, 2024 are exempt from the reporting requirement.?

This latter exclusion follows a successful challenge on constitutional grounds as recorded in National Small Business United v. Yellen.?

However, don’t rely on the NSBA’s victory to keep your small business from being penalized if you don’t file on time.?

A September 2024 ruling in the case of Firestone, et. al. v Janet Yellen, found that the act was within the scope of Congress’s powers and its filing requirement enforceable.?

Why are we just hearing about the pending BOI report deadline??

It’s likely that small businesses registering with their states in 2024 received some kind of warning from their state’s registrations department. Others may have heard about the rule from their accountant, financial advisor or legal counsel.?

Small businesses already up and running before January 1, 2024 might not have heard the news from anyone.

But as the filing deadline draws nearer, more voices are spreading the word. I learned about the law from a post in an online business networking group.?

I’ve since seen tax and other professional service providers and filing services post about the CTA and its BOI.?

It doesn’t cost anything to file your BOI report, by the way.?

You can pay a company to handle the fling for you.?

Or, you can do it yourself at the FinCEN website.?

Although, having completed the form for my single-owner LLC, I can see the benefits of paying for someone else to enter the data, particularly if you have multiple beneficial owners.?

I managed to survive the filing process without cursing or screaming despite my intense dislike for forms of any kind. In contrast, filing my taxes is usually a multi-curse event.?

The available text instructions often use the same language (jargon) as the form itself and don’t anticipate what I would assume are common questions and friction points.?

You’ll need to upload a photo ID for each applicant and beneficial owner and there’s a click-the-item CAPTCHA at the end of the registration process.?

Are you gonna file it??

With two opposing federal rulings on the legality of this registry, it may be tempting to wait a little bit longer before filing your report. I would have put off filing if I hadn’t wanted to include my experiences in this article.?

I recommend making your choice soon. Remember, this is a new system that’s not been tested against high-volume traffic. If you plan to file before the deadline, don’t start the process on New Year’s Eve.?