What is BOI and Why Was it Created?
BOI or Beneficial Ownership Information refers to the details of individuals who own or hold significant control over a legal entity, such as a corporation or limited liability company (LLC). Understanding BOI is crucial in combating financial crimes like money laundering, terrorist financing and tax evasion. By uncovering the true individuals behind these entities, authorities can hold those responsible and maintain the integrity of the financial system.
BOI was created to enhance transparency and accountability in corporate structures, ensuring that illicit activities cannot hide behind layers of anonymity.
The Corporate Transparency Act and Its Implications
The Corporate Transparency Act (CTA) was passed in January 2021 to help fight against financial crimes. The CTA mandates the collection and maintenance of accurate BOI by certain corporations and LLCs, aiming to prevent misuse of these entities for illicit purposes.
Under the CTA, qualifying entities must report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of Treasury responsible for safeguarding the financial system. Failure to comply with these requirements can result in severe penalties, including fines and imprisonment.
Penalties
If an individual becomes aware of inaccurate information in a report submitted to FinCEN and voluntarily corrects it within 90 days of the original report’s deadline, the CTA will provide safe harbor from penalties. However, failure to report complete or updated beneficial ownership information as required may lead to enforcement actions by FinCEN.
Willfully failing to report complete or updated beneficial ownership information, or knowingly providing false or fraudulent information may result in civil and/or criminal penalties. Civil penalties can reach up to $500 for each day that the violation continues, while criminal penalties can include imprisonment for up to 2 years and/or a fine of up to $10,000.
Timeline for Compliance
Existing Companies: If your company was created as of January 1, 2024, it must file its initial BOI report by January 1, 2025.
Companies Created or Registered Between January 1, 2024 and January 1, 2025: Companies will have 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective to file its initial BOI report.
Companies Created or Registered On or After January 1, 2025: Companies will have 30 calendar days from the date of actual or public notice that its creation or registration is effective to file its initial BOI report.