Startups Beware of FinCEN’s BOI Report Deadline

With FinCEN’s deadline for the Beneficial Owner Information (BOI) Report quickly approaching, one area of focus for them, as well as BOI Report service providers like FileForms, is startups. What is a startup? What affect does the BOI report have on startups? Look no further, we are answering these questions here.

What is a Startup?

What is a startup in today’s world? A startup is generally a company that has received direct private investment from Venture Capital funds, Private Equity funds, or individual Angel Investors to sell the company or go public at a future date.

During the Covid-19 pandemic, the Venture Capital (VC) space became increasingly popular with cryptocurrencies and crazy high valuations. Not all venture capital companies are writing huge checks like Sequoia or A16Z, most VCs are much smaller in scale and are writing much smaller checks.

How Will the BOI Report Affect Startups?

Generally, most startups will have an anchor investor (who writes the most-significant check) along with other smaller investors. This is where things are likely to get tricky…

In today’s world, most startups have founders and co-founders, indicating they were the ones that came up with the idea and are the majority shareholders. When these founders seek outside investment, they are now giving up their shares for cash to scale their business.

Most startups start with zero revenue and no product; they are selling an idea and betting they can execute it well. Since they are private companies, these startups will need to think about getting their organizational structure in place, along with their ownership structure, as they will likely need to prepare a BOI report to be filed in 2024.

As part of the Corporate Transparency Act, a beneficial owner exhibits substantial control or owns 25% or more of the reporting company. Someone who has substantial control over the entity is a gray area, as it could be the CFO, but they do not own over 25%. However, there are much more complex structures out there when it comes to private investing and business ownership.

FileForms Can Help!

Filing a BOI report, even when you might think it is not necessary, will be a best practice for any business, as it will help avoid penalties and even jail time in the long term. If you are concerned with how to file your BOI report, or you want to make sure you file it correctly, get started with FileForms now!