337 - The BOI (Beneficial Ownership Information) Report and Why You Need to File It ASAP

On today's episode of the podcast we're taking about the Corporate Transparency Act and why it comes with a Beneficial Ownership Information report. Spoiler alert: you'll need to fill out the BOI form this year if you haven't already.

When Congress makes new laws, they set a day when the law becomes effective. It’s a heads up that they’re changing the rules and that starting on that day-you’ll be expected to obey. 

That delay gives everyone time to

• read the new law, 
• ask questions about what the new law means, and 
• organize resources in preparation for the new law. 

In 2021 Congress passed a bundle of laws as part of the annual defense budget which came into effect on January 1st of this year called the Corporate Transparency Act.

The Corporate Transparency Act requires most businesses to disclose certain information to the federal government.

We’ll cover: 

• whether or not your business is exempt from reporting,
• whose information gets reported, and 
• how to report that information if you’re required to do so. 

The Corporate Transparency Act is for helping law enforcement agencies find, prevent, and prosecute financial crimes. Financial crimes can look like a lot of different things. A popular example you see in movies is money laundering, when people get money from illegitimate sources but can't just go deposit it in a bank or use it to buy a car or a new house with it so they disguise it as other assets and run it through their business. People have been doing this for a very long time and proving it can be difficult.

Back in 1970 Congress gave us the Bank Secrecy Act, which said banks have to actually help law enforcement identify and prosecute financial crimes. The reason was because banks didn’t care where the money was coming from, they were getting paid and it wasn’t their job to ask whether money was coming from a legitimate or criminal enterprise. Congress said banks don’t get to turn a blind eye and have to report suspicious activity or really huge transfers. While this helped a lot, there was still plenty they couldn't catch.

In 1990, Congress gave us a sub-department of the United States Treasury called the Financial Crimes Enforcement Network, or FinCEN. FinCEN lets law enforcement agencies talk to each other about that information that banks have to report, like suspicious activity or huge transactions.

They compare notes, so even if a single blip on the radar didn’t raise any alarms at the FBI, they might talk to state law enforcement and compare notes and find out about criminal activity they couldn’t see before. FinCEN even gives awards every year to different agencies that successfully use FinCEN’s data to prevent or prosecute crimes. 

For example, in 2023-

• The Drug Enforcement Administration used FinCEN data to find and seize 4.5 metric tons of cocaine
• The Secret Service and U.S. Postal Inspections Service used FinCEN data to shut down a scheme to compromise emails
• And the Department of Justice’s Civil Rights Division used FinCEN data to protect hundreds of victims of a human trafficking ring. 

But there was a huge absence of information for FinCEN that still made it really hard to crack down on financial crimes. 

FinCEN knew what the banks were telling them about suspicious activity and big transactions and what other agencies noticed about that information but they didn’t know who was behind these semi-legitimate businesses. 

That’s what this new law, the Corporate Transparency Act is for. Businesses affected by the law will have to complete a Beneficial Ownership Information report to FinCEN.

While it's not a ton of information they require from you, it's information from a ton of people, and that tells them more than you might think and helps them discover a lot more criminal activity that they couldn’t know about just from the banks or by talking to each other. 

By collecting a small amount of information about a lot of people, you can make connections in their interests, and gain insight into their activities. Congress says we’re now going to use that method of data interpretation to catch financial crimes and the people who benefit from them.

To comply with the law and tell them you aren't commiting financial crimes, you need to file a Beneficial Ownership Information report on FinCEN’s website.

I really doubt you fall under an exception, because basically the only companies that don’t have to file are businesses that already have to give FinCEN a bunch of information, like banks.

If your business was formed by filing with a secretary of state, you've got to dish your deets. LLC’s, Corporations, whatever. If you created it by sending a piece of paper to your Secretary of State, you gotta tell FinCEN who you are. If you have an ownership interest in a business, same deal, dish the deets. Important note here: It doesn’t matter to them if you have a controlling interest in a business, like the majority of shares or whatever. You are a quote “Beneficial Owner” as long as you have an ownership interest that you benefit from. 

If your name is going to be on a form to create a business like an LLC or corporation either this year or in the future, then you’re what they’re calling a Company Applicant, and you need to fill out a report. 

Whatever reason you have for filing a report, whether you formed a business or you’re a beneficial owner, or your name is going on the paperwork for a new business-we’re all going to the same place for this report. 

You go to FinCEN’s website and they have a big ol’ button on the front page that’ll take you to file at https://www.fincen.gov/boi

 

I recommend taking a minute to gather your info before you start, like, the same papers you would if you were jumping on a tax strategy or business entity formation call with me. We need stuff both for your business and for you personally, since you’re a beneficial owner. 

For your business, you’ll need to report:

• Your full legal name
• Any Doing Business As (DBA) or trade names
• Your complete current U.S. address
 The State, tribal, or foreign jurisdiction of formation (wherever you sent the papers to create your company)
• If it was formed abroad: the State or Tribal jurisdiction of first registration
• And your IRS Taxpayer Identification Number (including Employer Identification Number)

For each beneficial owner or company applicant, you’ll report:

• Full legal name
• Date of Birth
• Complete current residential address (except if you filed on behalf of a business, like if you’re a paralegal)
• Unique identifying number, issuing jurisdiction AND image of one of the following documents:
• U.S. Passport
• State driver’s license
• Identification document issued by a state, local government, or tribe. 

Great. Love it. Let’s talk due dates. 

If your business creation documents were filed prior to January 1, 2024 then you have until January 1, 2025. 

Amazing. That date feels pretty far off, but we want to treat it like a tax deadline and make sure we have all our information in so we can file ahead of schedule and spend Deadline Day relaxing at the pool. 

For new businesses being formed this year, you’ve got less time. 

If your business creation documents were filed/will be filed after January 1, 2024 then you have 90 days from the date of notice that the filing is effective. 

So you get an email from the secretary of state saying yes you can be a company, and you’ll have 90 days to tell FinCEN that it’s official.

Starting January 1, 2025, they really pick up the pace. If your business creation documents are filed after January 1, 2025 then you will have 30 days from the date of notice that the filing is effective. 

I know this might sound scary but don’t panic. Just follow rules and file your report. 

When they passed this law, Congress kind of interrogated FinCEN about how harsh they were going to be about the reports. FinCEN isn't looking for gotcha moments. They only want to prosecute willful violations. You are a pinpoint of data on a map of every business in America. They’re looking to trace the path of money from point to point and see when it cycles back or if it’s headed to something bad.

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