Running a successful business is all about trust. Your customers trust you to deliver a quality product or service, and you trust your partners and employees to help your business thrive. But what about the people behind the scenes who ultimately control the business?

Transparency in who owns and benefits from a company is crucial for building trust with customers and preventing illegal activity.

That’s where the Beneficial Ownership Information (BOI) rule comes in. This new regulation, implemented in January 2024, spotlights the beneficial owners of businesses. These are the individuals who ultimately control or benefit from a company, even if they’re not listed on official documents.

By requiring businesses to report this information to the government, the BOI rule helps ensure that criminals can’t hide behind anonymous companies for illegal activities.

So, the question is: does the BOI rule apply to your small business? The answer depends. If you’re a corporation, LLC, or similar business entity formed in the U.S., there’s a good chance you’ll need to comply.

We’ll break down the specifics of who must file a BOI report and what information is required in this guide.

Understanding the BOI Rule

The BOI rule stems from an effort to increase transparency in business ownership. In 2021, the U.S. Congress passed the Corporate Transparency Act (CTA), which aimed to crack down on criminals who use anonymous shell companies to hide their activities. The BOI rule is one key way the CTA is being implemented.

What Information Needs to Be Reported?

So, what exactly do you need to report under the BOI rule? Let’s find out:

Beneficial Owner Information

This is the core of the BOI report. You’ll need to provide information on each individual considered a beneficial business owner. It includes:

• Full legal name

• Date of birth

• Current address

• Social Security number (SSN) – Note: This is only required for beneficial owners who are U.S. citizens or permanent residents.

Business Details

You’ll also need to report some basic information about your business, such as:

• Legal name

• Primary business address

• Employer Identification Number (EIN)

Ownership and Control Structure

This section outlines who owns and controls your business. You’ll need to provide details on:

• The percentage ownership interest of each beneficial owner

• Any positions they hold within the company (e.g., CEO, director)

Filing Your BOI Report

Filing your BOI report is a straightforward process. Here’s what you need to know.

Existing businesses had 90 days to file after the rule went into effect (January 1, 2024). Check the FinCEN BOI FAQs for any updates on deadlines. New businesses have 90 days from the date their formation document is filed with the state.

The reports are filed electronically through the FinCEN BOI E-Filing website.

Benefits of the BOI Rule

While the BOI rule might seem like extra paperwork, it can actually benefit your business:

• Enhances Transparency and Trust: You can build trust with potential customers and partners by clearly showing who owns and controls your business.

• Reduces the Risk of Fraud: The BOI rule makes it harder for criminals to use your business for illegal activities. This can help protect your company’s reputation and avoid potential legal issues.

Impact of the BOI Rule on Small Businesses

The BOI rule brings new requirements for small businesses, but complying doesn’t have to be a headache. Here’s a breakdown of what you need to do and some potential roadblocks you might encounter.

Compliance Considerations

Getting ready to file your BOI report involves some essential steps. The first step is to identify beneficial owners, who might seem simple but can get tricky.

A beneficial owner is anyone who owns or controls at least 25% of the business or has significant influence over major decisions. Take time to understand your ownership structure and who qualifies as a beneficial owner.

Once you’ve identified your beneficial owners, you’ll need to collect the specific details required for the report, like their names, addresses, and SSNs (if applicable). It’s best to gather this information well in advance to avoid any last-minute scrambling.

Remember, existing businesses have a deadline, and new companies have 90 days to file their formation documents. Don’t miss the deadline – late filing can result in penalties.

Potential Challenges

Let’s be honest, navigating new regulations can be confusing. Here are some challenges you might face:

💼 Identifying Beneficial Owners: Sometimes, ownership structures can be complex, especially in businesses with multiple partners or investors. If you’re unsure who qualifies as a beneficial owner, it’s best to err on the side of caution and include them in your report.

💼 Time Constraints: Gathering information and filing the report can take time, especially for busy small businesses. Start early and delegate tasks if possible to meet the deadline smoothly.

💼 Confusion About the Filing Process: The BOI rule is new, and the process might seem overwhelming. Don’t worry, help is available.

Solutions and Resources

The FinCEN website provides extensive information on the BOI rule, including FAQs, guidance documents, and even a handy flowchart to help you determine whether you need to file.

If you’re still feeling lost, consider seeking professional help from experts like doola to guide you through the process and ensure your report is filed correctly.

Remember, complying with the BOI rule is important for your business. By taking proactive steps and utilizing available resources, you can ensure a smooth filing process and the benefits of increased transparency for your small business.

Exemptions and Special Cases

The BOI rule applies to most U.S. corporations and LLCs, but some exceptions exist. 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

Complex Ownership Structure? No Problem

The BOI rule applies to various business structures, but it might seem trickier for those with complex ownership. Here’s a quick tip for common scenarios:

• LLCs: Members are considered beneficial owners in LLCs if they hold at least 25% ownership interest or significant control. Identify and report them accordingly.

• Partnerships: Similar to LLCs, partners with 25% ownership or significant control are considered beneficial owners. Gather their information for the report.

If your business structure is particularly intricate, seeking guidance from the experts at doola can ensure you’re filing correctly.

The Future of BOI Reporting

The BOI rule is still new, and like any new regulation, it’s subject to adjustments based on feedback and experience. Here’s what to expect:

Potential Changes and Updates

The BOI rule is designed to be effective and user-friendly for businesses. The rule might see some tweaks as feedback comes in from businesses and government agencies. For instance:

• The filing process might be streamlined to make it easier for businesses to submit their BOI reports.

• Some terms in the rule, like “significant control” of a business, might be further clarified to avoid confusion.

• The list of exempt businesses might be adjusted based on industry feedback.

Stay Compliant With doola

The BOI rule brings a new layer of transparency to business ownership in the U.S. By requiring businesses to report information on their beneficial owners; it aims to combat illegal activity and build trust in the business landscape.

The BOI report requires details on beneficial owners (individuals with significant ownership or control), business information, and ownership structure. Filing your BOI report is done electronically through the FinCEN BOI E-Filing website.

Most U.S. corporations and LLCs must comply with the BOI rule, but some exceptions exist, such as publicly traded companies and certain financial institutions.

We know keeping your business compliant can be a headache. That’s where doola comes in!

Schedule a free consultation with one of our doola experts. We can provide guidance and clarify any uncertainties you might have.

We also understand that you’d instead focus on growing your business than dealing with the “boring backend work.” doola can handle tasks like filing the BOI report and other compliance needs, freeing you up to focus on your passion.