Small businesses, entrepreneurs and startups all need to stay up to date with all kinds of regulations and rules that they are required to follow in order to stay in compliance. Those keep changing and developing, as you may have noticed. For instance, the Beneficial Ownership Information (BOI) reporting requirements have been added to the Corporate Transparence Act (CTA) in 2024, requiring businesses to understand this concept, as well as to file the necessary reports in order to ensure compliance.
If you haven’t really thought about this that much in the past, either because you are a new business on the market, or because you simply haven’t still gotten around to understanding the BOI, chances are that you have some questions about it on your mind. Among other things, you absolutely want to know what the penalties for failing to file the reports on time actually are. And, well, we are certainly going to answer that question for you, but not before we make the concept perfectly clear first. So, keep on reading to find out what all of this entails, as well as what the late filing penalties are, and how you can avoid them.
What Is BOI Reporting?
Naturally, we are going to begin with the most basic question here. You have to understand the concept first, before you proceed towards getting familiar with the potential penalties, and with the right method for avoiding them. So, BOI reporting is, as I have mentioned, a new requirement under the CTA, and it refers to companies being required to disclose their ownership and control information. Its primary purpose is to prevent financial crimes, such as, for example, tax evasion, money laundering, and even terrorism.
Most companies in the USA that are structured as LLCs, corporations and similar entities are required to file these reports. There are, however, some exceptions. For example, nonprofits, regulated financial institutions, as well as some large operating companies may not be required to file these. The best thing to do is check the rules in details to see if they apply to your, or if you may be exempt from this particular requirement.
Now, you are probably wondering what kind of information is actually filed within the BOI. The idea is, clearly, to disclose the information about beneficial owners. And beneficial owners are all individuals that, either directly or indirectly, own at least 25% of the company, or that exercise substantial control over the company.
The details you have to disclose are pretty straightforward. First of all, there is the full legal name, as well as the date of birth. Then, you have to disclose the current residential address, as well as the identification number, and a copy of a document containing that number, such as, for example, a passport, or a driver’s license, and similar. You have to file the BIO report within 90 days of registering, as well as a new one within 30 days after noticing some errors, or after the information changing, because, otherwise, you’ll have to face penalties.
What Are the Penalties for Failing to File on Time?
So, now that you have a better understanding about BOI reporting in general, you want to learn a bit more about those penalties that you could wind up paying due to not filing the report on time. And, you should absolutely know that failing to report is not considered simply a minor oversight. Instead, it can cause some quite serious legal and financial consequences. Let me now tell you more about those, so that you can understand the risks and figure out precisely what to expect should you fail to file.
To cut right to the chase, your business can be fined as much as $500 per day for each day that the violation continues, that is, for each day that you don’t file the report. As you can imagine, this can accumulate to quite a lot if you postpone the decision to not file, and if you are thus, not in compliance with the rule for a prolonged period of time. The amount can turn out to be quite high, which is why it is best for you to always ensure that you file on time.
In addition to that, you could even face some criminal charges for willful failure to report, or if you provide false information. Apart from the fine being as high as $10,000 in those cases, you could also face imprisonment for up to two years, and I am sure that this is something you would much rather avoid. Make sure, therefore, to always provide accurate information, and on time.
Then, there are also some other consequences that you may wind up facing if you don’t file the BOI report on time. For one thing, your business could wind up being under increased regulatory scrutiny. Then, you will suffer reputational harm with the banks, investors, as well as the clients, all of which could be financially challenging for you. And then, if lenders uncover non-compliance, that could also result in a disruption of your business relationships, and potentially your finances as well, which is another huge risk that you want to avoid.
How to Avoid Them?
Now, the most straightforward answer to the question of how you can avoid those fines and other types of risks is that you should file the BOI report on time, as well as ensure that all the information is accurate and truthful. But, the rules are fairly new, and you may not be aware of all of them, meaning that you may wind up in non-compliance but not on purpose. This is why leveraging professional help is always the best idea here, as that’s a clear path towards avoiding those penalties and risks.
Basically, you should partner up with an accounting and compliance company that knows the ins and outs of all the rules, and that will, therefore, ensure you’re observing them. The key is, naturally, in choosing a great company to provide you with the services you need. So, take your time to research more of them, then partner up with the one you believe is best for you, and stop worrying about the penalties related to untimely or inaccurate BOI reporting, because the pros will do it all for you, and they’ll do it the right way.
