Consequences of Not Filing a BOI Report
If you’re a business owner, you’ve likely heard about the beneficial ownership information (BOI) report that many companies must submit by the end of this year. This report, filed with the Financial Crimes Enforcement Network (FinCEN), aims to document information about the individuals who own, control, and benefit from businesses in the U.S.
Companies required to file these reports are classified as reporting companies, with specific deadlines based on their registration date. Failing to file a BOI report on time can lead to significant civil and criminal penalties, including hefty fines and potential jail time.
In this article, we’ll outline the penalties for incorrect BOI reporting and the importance of compliance.
Understanding BOI Report Requirements
A BOI report includes essential details about the individuals who own or control a company. FinCEN implemented this requirement to combat the misuse of shell companies and other questionable business practices that facilitate illegal activities. The information collected will be securely stored and may be accessed by authorized government officials for national security or law enforcement purposes.
Here are the key points to remember about BOI reporting:
Who Needs to File?
If your business was formed in the U.S. through a Secretary of State or similar agency, you may need to submit a BOI report by the end of the year. If you're unsure whether your company is required to file, check out our previous blog post, “What Is a BOI Report and Do You Need to File One?”Deadlines:
Companies registered before January 1, 2024, must submit their BOI reports by January 1, 2025.
Businesses registered in 2024 must file their reports within 90 days of registration.
New businesses formed after January 1, 2025, have 30 days to submit their BOI report.
Information Required:
The report will ask for details about the business and its beneficial owners. Beneficial owners are defined as individuals with significant control (direct or indirect) or who own at least 25% of the company. Those identified must provide their legal name, address, date of birth, and a photo ID, along with the company’s information, including trade names, addresses, formation details, and IRS taxpayer ID.
Don’t Delay in Filing
Timely submission of your BOI report is crucial. Here are a few reasons why:
Processing Delays: Since this is the first year for BOI reports, delays are possible. Filing at the last minute could expose you to penalties.
Rising Costs: If you plan to use a professional service to help you file, be aware that their fees may increase as the deadline approaches. It's wise to file sooner rather than later.
In conclusion, adhering to BOI reporting requirements is essential to avoid severe penalties. Stay informed, act promptly, and ensure your business complies with these new regulations.
Providing False Information
For detailed enforcement provisions, refer to the Small Entity Compliance Guide, but here’s a quick overview: if you intentionally violate reporting requirements, you could face civil penalties of $591 for each day the violation persists. Additionally, willful violations can lead to criminal penalties, including up to two years in prison and fines of up to $10,000.
Both individuals and corporate entities can be held liable for breaching FinCEN’s reporting requirements. If false information is submitted, both the filer and the source of the information may be held accountable. If reports are not filed or updated as necessary, the business could face repercussions along with any individuals responsible for the failure or those in senior leadership roles.
Misuse of Information
Another serious risk arises from the misuse of information obtained through BOI reports. The Corporate Transparency Act (CTA) allows FinCEN to share BOI report information with certain federal agencies, law enforcement, some foreign entities, U.S. Treasury personnel, regulatory agencies, and specific financial institutions.
These recipients must meet strict security and confidentiality requirements before accessing BOI data, and there are rigorous rules governing its use. Unauthorized access or misuse of this information can lead to civil penalties of up to $591 per day and criminal fines up to $250,000, with possible imprisonment for up to 10 years.
If an individual misuses BOI data in violation of other laws or demonstrates a pattern of illegal activity, they may face enhanced penalties, including fines up to $500,000 and imprisonment for up to 10 years.
Allowance for Mistakes
While the penalties for knowingly withholding or misusing information are severe, FinCEN does allow for some leniency regarding inadvertent errors. If business owners acknowledge and correct inaccuracies within 90 days of the filing deadline, penalties may be waived. For instance, if you submit your BOI report on November 15, 2024, and later realize a beneficial owner's Social Security number is incorrect, you have until 90 days after January 1, 2025, to rectify it.
If your information changes—like a company name change or a new CEO—you must file an updated report within 30 days of the change. Failing to correct inaccuracies or report changes could lead to penalties as outlined earlier.
Protect Yourself and Your Business
While the new federal reporting requirements may seem overwhelming, completing the BOI report is essential for your peace of mind and your business's success. The sooner you fulfill this obligation, the better.
You can file your report now at FinCEN’s BOI E-filing website. Although FinCEN expects most reporting companies to submit their information independently, CorpNet can assist you and take the stress out of the process.
Understanding the BOI filing requirements is crucial, and CorpNet offers a Beneficial Ownership Information Report Fact Sheet to help you navigate the process effectively.