Non-compliance can result in substantial penalties, including fines of up to $500 per day and possible criminal sanctions.
The BOI Reporting Rule is a serious new obligation that impacts almost all small and mid-sized for-profit businesses,” said attorney Jennifer Mott, a partner at AWD Law. “Under the new law and regulations, businesses must file reports with FinCEN that identify their beneficial owners, managers, senior officers and non-owners that make important decisions for the company, including some personal information about those individuals.”
The new requirement has been created to address the problem of illegal activities being hidden among layers of impenetrable shell entities. While the disclosures are not expected to be overly burdensome for most owner-operated or small businesses, other companies will have to analyze their ownership and management structures, says Mott. Non-compliance can result in substantial penalties, including fines of up to $500 per day and possible criminal sanctions.”
A “reporting company” under this rule includes corporations, limited liability companies (LLCs), and other entities formed under state law or foreign companies registered to do business in the United States.
Tax-exempt entities, companies already regulated by the state or federal government, and some companies with $5 million in gross receipts or sales a year, may be exempt from the reporting requirement. Mott notes, it is the small businesses that must prepare to navigate a new landscape of financial reporting, providing detailed information about their beneficial owners.
According to FinCEN’s compliance guide, entities in existence as of Dec. 31, 2023, are required to file their initial BOI report by Jan. 1, 2025. New entities formed or registered after Jan. 1, 2024, face a much shorter deadline, needing to file within 30 days of formation or registration; however, a pending rule proposes extending this to 90 days during 2024.
Any updates to the information in the initial report must be filed within 30 days. Mott says this approach emphasizes the urgency and importance of ongoing compliance for all affected businesses.
“The BOI Reporting Rule is a critical tool in enhancing corporate transparency, particularly in small to mid-sized companies. It is essential for businesses to understand these new requirements and integrate ongoing compliance measures into their operations,” said Mott. “The BOI Rule demonstrates the heightened importance of corporate governance for small businesses and may prompt owners to reassess and implement best practices that benefit small businesses overall.”
Thus, the BOI Reporting Rule represents a significant development in the U.S. corporate regulatory environment. By adhering to this rule, Mott says, businesses can not only comply with legal requirements but also contribute to a more transparent and ethical corporate world. For more information, visit https://www.fincen.gov/boi or https://awdlaw.com/beneficial-ownership-information-reporting/. FBN
By Scott Hathcock, FBN
Scott Hathcock is the president and CEO of Moonshot.
Courtesy Photo: Attorney Jennifer Mott says the Beneficial Ownership Information Reporting Rule is a legal requirement for businesses designed to promote a more transparent and ethical corporate world.
