If you own a small or medium sized business in the U.S., you need to know about the Corporate Transparency (CTA) and Beneficial Ownership Information Reporting (BOIR). This new legal requirement impacts over 30 million LLCs and corporations formed in the U.S. and comes with serious penalties for noncompliance.
The CTA requires companies to submit BOI Reports to the Financial Crimes Enforcement Network (FinCEN) before specific deadlines. FinCEN’s BOI E-Filing System is free for business owners to use. However, it can be tricky to complete the BOI Report on your own without making any mistakes.
Given the heavy penalties (including fines and jail time), making small mistakes in your BOI Report comes with big risks.
In this article, we cover common mistakes you need to avoid making when completing your company’s Beneficial Ownership Information Report. Additionally, we tell you about some solutions to help you file your report properly with FinCEN.
What Are BOI Reports and BOIR?
Beneficial Ownership Information Reports, or “BOI Reports”, are a federal legal requirement that U.S. businesses need to complete to avoid penalties. The Corporate Transparency Act (CTA) requires companies to submit BOI Reports to the Financial Crimes Enforcement Network (FinCEN) before specific deadlines.
BOI Reports contain information about a company and all of its “beneficial owners”. Beneficial owners include anyone who owns at least 25% of the company, or has “substantial control” over the business.
FinCEN labels businesses required to submit BOI Reports as “reporting companies”. Reporting companies include limited liability companies (LLCs), corporations, limited partnerships (LPs), and any type of entity formed by filing documents with a state government.
Reporting companies must submit BOI Reports to FinCEN before specific deadlines to be considered “compliant”. The deadlines for BOI Reports vary based on the company’s formation date in the U.S.
New companies being formed on or after January 1, 2024 have 90 days after the company’s formation date to file a BOI Report. Existing companies formed before January 1, 2024 need to file BOI Reports by December 31, 2024.
Top BOI Report Mistakes to Avoid
FinCEN’s online filing system makes it easy to make mistakes. Your company’s BOI Report needs to be both complete and totally accurate to be accepted by FinCEN.
Making mistakes in the BOI Report could come back to bite you. FinCEN can charge you and all of your company’s beneficial owners with penalties, including fines and even jail time, for reporting incorrect information.
Avoid these common mistakes when submitting your company’s BOI Report on your own:
#1) Learn the Requirements Before Reporting
FinCEN’s E-Filing system is just that, a filing system. FinCEN’s reporting form does not explain the reporting requirements or provide any guidance while you are filling it out.
Some business owners may dive into the BOI Report without learning about the reporting requirements first. However, this could be a big mistake. You will need to know exactly what you need to report before you start the e-filing process.
Learning all of the BOI Reporting requirements can take time. The Small Entity Compliance Guide on FinCEN’s website is 56 pages long. You may miss important details in your BOI Report if you don’t learn all of the requirements ahead of time.
#2) Identify Every Possible Beneficial Owner
“Beneficial owners” include more than just a company’s direct owners. Anyone who exercises “substantial control” over a reporting company is also a beneficial owner. People with substantial control include all of a company’s senior officers, the board of directors, and anyone involved in making important decisions for the business.
#3) Check for Mistakes or Typos
You need to make sure that your company’s BOI Report is both complete and accurate. That means that you can’t have any typos or incorrect information in your report.
FinCEN’s BOI E-Filing system does not provide any kind of spell checking or address verification features. Be sure to double check all of the information you enter into the report before hitting submit.
#4) Do Not Use your Registered Agent’s Address
FinCEN requires companies to report a principal business address located in the U.S. This cannot be the registered agent’s address.
Companies that are not headquartered in the U.S. need to report an address where the company’s U.S. based operations are primarily located.
You should never use your registered agent’s address as the business address for your company. The registered agent address can only be used to satisfy legal requirements in the company’s home state and to receive certain legal documents.
#5) Do Not Report a P.O. Box
You need to list physical addresses for the company and each beneficial owner in the BOI Report. These need to be full street addresses. You cannot list a P.O. box as an address in your company’s BOI Report.
#6) Report the Right Company Applicant
New companies formed on or after January 1, 2024 need to report their company applicants. The company applicants are the individuals who are most responsible for having the company formed.
A reporting company can only have up to two company applicants:
Company Applicant 1 is the person who submitted the company’s formation documents to the Secretary of State’s office. Think of this company applicant as being the “last mile” in the formation process. If you used an incorporation service to form your company for you, this company applicant will be the employee who filed the paperwork with the state.
Company Applicant 2 is the person who was most responsible for ordering the company to be formed. Think of this company applicant as being the “first mile” in the company formation process.
It’s easy to get confused about who the company applicants are when completing your BOI Report. If you filed your company formation documents yourself, then you can report yourself as the only company applicant.
#7) Report All Business Names
You need to report any alternate names your company uses for business other than its official legal name. These include publicly filed trade names, like DBAs. However, it also includes any trade names that are not officially filed. Website URLs could even be considered alternate names for reporting companies that do business online.
Basically, if your company provides products or services under different names, you need to include them in the BOI Report.
#8) Keep Copies of Your Information
FinCEN’s E-Filing system gives you a confirmation receipt as proof that the report was submitted successfully. However, FinCEN does not give you a copy of your report, or the information that was included.
This can be problematic because you can’t double check the report for accuracy after it’s been submitted. Additionally, FinCEN does not provide a way to see whether your company has already filed a BOI Report before.
Business owners should keep records of all the information submitted in their company’s BOI Report. This includes the images of ID documents that they upload for each beneficial owner.
Keeping records allows you to check the information for accuracy and file corrected reports if needed. Additionally, keeping records of BOI Reports can help you keep track of changes that require filing an Updated BOI Report.
#9) Keep Track of Changes and Updates
Complying with the CTA doesn’t end after you submit your company’s Initial BOI Report. Beneficial Ownership Information Reporting is an ongoing commitment. You need to update your company’s BOI Report any time the information in a previous report changes.
So, if a beneficial owner changes their home address, or there’s a change in the company’s ownership or management, you need to file an Updated BOI Report with FinCEN within 30 days.
How Long Do BOI Reports Take?
FinCEN estimates that BOI Reports could take anywhere from 90 minutes to 11 hours to complete using their BOI E-Filing system.
The amount of time it will take you to complete a BOI Report for your company will depend on a few factors:
A.) How much you know about BOI Reporting:
FinCEN’s rules and guidelines for BOI Reporting include lots of terms and legal language. Do you know what “beneficial ownership” means? What about “substantial control”? Do you know who your company applicants are?
You will need to take the time to learn the basics of BOI Reporting before starting your report.
B.) How many owners your company has:
Reporting Beneficial Ownership Information becomes more complicated the more beneficial owners your company has. One person companies have the simplest reporting obligations.
FinCEN estimates the following reporting times based on a company’s size:
90 Minutes for One-Person Companies:
FinCEN estimates that a one-person company, like a single-member LLC, should be able to complete its Initial BOI Report within 90 minutes. This includes the total time to learn about the reporting requirements, gather the necessary information, and fill out the report online.
5-hours for Medium Sized Businesses
Companies with multiple beneficial owners can expect to spend about 5 hours completing their BOI Reports, according to FinCEN. This is because collecting information and ID documents from multiple people can take a lot of time.
Additionally, you will need to spend time making sure you have identified all of your company’s beneficial owners. Identifying beneficial owners becomes increasingly more challenging the larger a business gets.
Remember that anyone with substantial control over the business needs to be reported, even if they are not a direct owner in the company.
11-hours for Large Companies
FinCEN expects large to take up to 11 hours to complete their BOI Reports. These companies are likely corporations with 10 or more beneficial owners, including shareholders, officers and directors.
Large companies will likely spend a significant amount of time collecting information and ID documents from all of their beneficial owners.
What are the Penalties for BOIR Violations?
FinCEN’s regulations for BOIR come with civil and criminal penalties. Penalties can apply to all of a company’s beneficial owners and senior officers.
FinCEN can charge companies with civil penalties for simple reporting violations. These penalties include fines up to $500 per day. Not filing the report on time or including mistakes in the report are examples of violations that can lead to fines. Additionally, FinCEN can fine a reporting company if it does not update its beneficial ownership information when necessary.
Anyone who willfully violates the BOI Reporting requirements can face criminal charges under the Corporate Transparency Act. Criminal penalties under the CTA include fines up to $10,000 and up to 2 years in federal prison. Examples of willful noncompliance include intentionally reporting false information, or refusing to file a BOI Report all together.
Who Do Penalties Apply To?
FinCEN can charge anyone involved in a company’s senior leadership with civil and criminal penalties for reporting violations. Beneficial owners and senior officers can be personally charged with fines and jail time if the company fails to file a complete report by the deadline.
Additionally, anyone who prevents a company from submitting their BOI Report on time can be held responsible and charged with fines, even if they’re not an owner or control party.
Why Use a BOIR Filing Service?
Business owners can avoid the headache of using FinCEN’s BOI E-Filing system by using a BOIR Filing service, like CTAboi.com, instead. CTAboi.com’s BOI Reporting Tool walks you through the BOI Report to help streamline your reporting experience.
Once you’re done, CTAboi submits your BOI Report directly to FinCEN. After filing your report, CTAboi can help you manage your company’s beneficial ownership information making it easier to keep track of changes and update reports.
Benefits of Using CTAboi.com to File BOIR
Here are some of the ways that CTAboi.com can help business owners complete their BOI Report:
Easy-to-Use BOI Reporting Tool
CTAboi.com’s BOI Reporting Tool is a user-friendly alternative to FinCEN’s BOIR E-Filing system. The Reporting Tool guides you through the BOI Report to make sure you don’t miss any important details.
CTAboi.com’s BOI Reporting Tool helps you learn about the BOIR requirements as you fill out the report. This way, you can avoid having to spend time teaching yourself the reporting rules while struggling with FinCEN’s BOI E-filing system.
Manage Reports Through Your Dashboard
CTAboi.com’s BOI Reporting Tool puts every BOI Report for each of your companies in one place. You can use your CTAboi.com dashboard to easily check the status of different reports and keep records of past reports.
Easily Complete Updated Reports
CTAboi.com allows business owners to seamlessly update FinCEN whenever their company’s beneficial ownership information changes. Just go to your CTAboi account dashboard, select the company, update the information, and CTAboi will file an Updated BOI Report to FinCEN automatically.
Get Expert Guidance
CTAboi.com has a team of CTA experts who can help you understand the requirements so you can submit your report properly.