BOI Report Checklist for Tax, Legal, and Financial Professionals

February 29, 2024

Filing the Beneficial Ownership Information (BOI) Report to comply with the reporting requirements of the Corporate Transparency Act (CTA) can seem like an overwhelming task. But fear not! If you are a tax advisor aiming to complete this process for your clients, we’ve got your back. This guide offers a concise yet thorough overview to help you cover all aspects of the process and maintain full compliance with the CTA. Let’s get started.

Over 2 million corporations and LLCs are formed in the U.S. each year, all of which are required to report beneficial ownership information under the CTA. – Financial Crimes Enforcement Network

What are the key steps in filing the Beneficial Ownership Information Report?

Understanding the nuances of the filing process is a crucial step for tax advisors tasked with filing their clients’ Beneficial Ownership Information Reports under the CTA. To facilitate this process, we’ve developed a comprehensive checklist:

1. Determine if the Organization Qualifies as a Reporting Company

Not all businesses need to submit Beneficial Ownership Information (BOI) Reports. Certain businesses, including public companies, most financial institutions, investment funds registered with the SEC, and specific non-profit organizations, are exempt. The CTA lists 23 exemptions in total.

The CTA categorizes “reporting companies” into two types, both required to provide beneficial ownership details to the Financial Crimes Enforcement Network, or FinCEN:

Domestic Reporting Companies

This refers to limited liability companies, corporations, and similar structures formed under the law of any U.S. state or Indian tribe.
Foreign Reporting Companies

Certain foreign entities approved to do business in any state or tribal jurisdiction also need to file reports.

If it’s unclear whether a company qualifies for an exemption, it is advisable to seek expert legal advice. Incorrectly classifying a business can have unintended results, including civil penalties of up to $591 per day with a maximum of $10,000 for non-compliance. It is essential to conduct a comprehensive review to confirm whether your client’s company unequivocally qualifies for an exemption or meets the definition of a Reporting Company and is required to file a BOI Report.

2. Reviewing Ownership Structure

A critical step that requires careful attention is the review of the ownership structure. Identify each owner’s percentage of ownership to determine who may qualify as a Beneficial Owner. Remember that an individual may be considered a Beneficial Owner through a 25% or greater ownership interest in the company, either directly or indirectly. If there are indirect owners in a tiered organizational structure, it is vital to document the chain of ownership accurately.

3. Substantial Control and Significant Decision Makers

Individuals exercising substantial control over the entity, such as senior officers or individuals holding significant voting rights, also need to be identified as they may also be considered Beneficial Owners. The process may involve detailed inquiries or research, particularly when dealing with complex company structures.

4. Collating Relevant Information

Collect all necessary details about each Beneficial Owner, such as their full legal name, residential address, date of birth, unique identifying number, and a photo of the identification document (i.e., passport or driver’s license). It is

paramount that the gathered information is accurate and up-to-date to prevent discrepancies.

5. Submitting the Report

The last step involves filing the report with the Financial Crimes Enforcement Network (FinCEN). Be sure to review the filing instructions and deadlines to avoid penalties.

The implementation of the CTA and the associated Beneficial Ownership Information Reporting requirements pose complex challenges for business owners and their advisors to remain compliant. Utilizing a trusted CTA expert, such as FileForms, can ease this compliance burden and streamline the BOI Reporting process. When in doubt, consult a trusted advisor to avoid missed filings and potential penalties for your clients.

What are the common mistakes to avoid when filing this report?

Tax advisors may encounter pitfalls when filing BOI Reports for the first time, which can result in serious consequences down the road. Here are some common mistakes to avoid:

1. Overlooking Report Amendments

Changes in previously reported information, such as a change in a Beneficial Owner’s Information or a change to the ownership structure, may require a company to file an updated BOI Report. A common error is the failure to update and amend these changes in the Report, which can lead to inaccurate and non-compliant filings. Therefore, it is crucial to implement systems for regularly checking and updating any changes to previously reported Beneficial Ownership Information.

2. Ensure Consistency of Reported Information

Verification of Beneficial Owner identities is a multi-step process. While internal verification is essential, inconsistencies in reported information across different sources can indicate errors or unreported changes. Consistency in reported information to banks, taxing authorities, advisors, and the BOI Report helps ensure accurate reporting.

For instance, confirming that Beneficial Owners identified by the company align with those in an Annual Report or organizational chart prepared internally can ensure that information is accurately reported and compliant.

3. Misinterpreting Substantial Control

Another common error involves misinterpreting or disregarding the depth of examination required to establish substantial control. Analyzing the level and nature of control exercised by a Beneficial Owner necessitates a nuanced understanding of the ownership structure and relevant roles and responsibilities. Overlooking subtleties in this area can lead to incomplete or incorrect reporting.

4. Inattention to Filing Deadlines

The CTA operates on strict regulations and timelines. Falling behind these timelines can result in non-compliance and potential penalties. Consistent monitoring of regulatory updates and deadlines ensures timely filing and compliance.

☐ Companies formed or registered before January 1, 2024, have until January 1, 2025, to file their initial BOI Report.

☐ Companies formed or registered on or after January 1, 2024, have 90 days from the date of formation/registration to file their initial BOI Report.

☐ Companies formed or registered on or after January 1, 2025, have 30 days from the date of formation/registration to file their initial BOI Report.

Millions of corporations and LLCs are created in the U.S. each year. Nearly every one of these companies will be required to file a BOI Report unless they qualify for a filing exemption.

5. Lack of Documentation

Failure to maintain accurate and current records jeopardizes the entire reporting process. Inadequate record-keeping obstructs the retrieval of necessary data and makes tracking changes in Beneficial Ownership significantly challenging.

Being aware of these common mistakes and keeping a proactive approach towards Beneficial Ownership Information Reporting will ensure compliance and accuracy, helping tax advisors to assist their clients efficiently.

Approximately 70% of tax professionals have reported an increase in workload due to the CTA reporting requirements. -Federal Register

What are the penalties for non-compliance with the CTA reporting requirements?

Failure to adhere to the reporting requirements outlined in the Corporate Transparency Act can result in substantial penalties. Through this list, we aim to ensure that tax advisors grasp the legal, financial, and professional ramifications of not complying with the BOI Reporting guidelines.

1. Financial Penalties

Companies that fail to comply with the CTA’s reporting requirements may be subjected to monetary fines. Notably, failure to report or intentionally filing false Beneficial Ownership Information can result in civil penalties of up to $591 per day that the violation continues, capped at a maximum penalty of $10,000.

2. Criminal Penalties

Beyond financial measures, criminal penalties may also apply to acts of non-compliance. Individuals making wilfully false statements in their Reports may be convicted of a federal felony, resulting in imprisonment of up to two years.

3. Impact on Professional Standing

Non-compliance and accompanying penalties may tarnish a professional’s or firm’s reputation within the industry. The tax advisor may experience a loss of credibility, jeopardizing future business relations and prospects.

5. Enforcement Actions

The Financial Crimes Enforcement Network (FinCEN) oversees the enforcement of the CTA. It holds the authority to impose penalties, initiate corrective action, and, if necessary, prosecute companies or individuals for non-compliance.

The CTA imposes significant civil and criminal penalties for non-compliance with BOI Reporting requirements. Failing to comply with these requirements may cost your clients time and money and impact you or your firm’s professional reputation. Tax advisors must educate themselves on the provisions of the CTA to ensure that they do not expose their clients or themselves to these staunch penalties.

Concluding Thoughts

With the increasing burdens of adhering to CTA provisions and the prevalent interest in ensuring operational compliance, it is paramount to have an understanding of the BOI Report filing process, potential hurdles, and penalties due to non-compliance. Professional knowledge, meticulous preparation, and vigilance are imperative not only in filing an accurate and timely Beneficial Ownership Information Report but also in preserving the credibility of your professional standing.

FileForms has pioneered a cutting-edge BOI Reporting filing solution coupled with a technologically advanced platform, revolutionizing CTA compliance for tax advisors and their clients. By providing a seamless user experience, we empower tax advisors to effortlessly navigate CTA provisions and associated reporting requirements through a combination of insightful educational resources and targeted outreach campaigns.

Our innovative product not only represents a strategic investment for professional firms, offering a lucrative revenue stream while ensuring client compliance, but it also optimizes workflow efficiencies, thereby saving tax advisors precious time. Furthermore, we offer a secure, centralized repository for all Beneficial Ownership Information (BOI), ensuring confidential document storage and easy access when needed.

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