The introduction of the Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act (CTA) has significantly changed how businesses in the United States report ownership information to the Financial Crimes Enforcement Network (FinCEN). While the goal of this legislation is to increase transparency and reduce financial crime, it has also introduced a set of challenges for companies when it comes to e-filing the BOIR. Whether you’re a new business or an established entity, understanding common mistakes to avoid and best practices for BOIR e-filing is essential for staying compliant and avoiding costly penalties.
In this article, we will walk you through common mistakes to avoid when filing your BOIR electronically and the best practices to follow to ensure smooth and accurate submissions.
What is BOIR E-Filing?
The Beneficial Ownership Information Report (BOIR) is a mandatory filing that requires businesses to disclose their beneficial owners to FinCEN. The report includes detailed information about the individuals who own or control the company, ensuring transparency in corporate ownership and making it harder for illicit actors to hide behind complex corporate structures.
The BOIR filing must be done electronically through FinCEN’s BOI E-Filing System, which is the official platform for submitting ownership information. This e-filing process allows businesses to submit the required data quickly and securely.
The Corporate Transparency Act requires most entities, such as corporations, limited liability companies (LLCs), and similar entities operating in the U.S., to file their BOIR unless they are exempt. Failure to file or submitting inaccurate or incomplete information can result in severe penalties, including fines and even criminal charges in some cases.
Common Mistakes to Avoid in BOIR E-Filing
While the BOIR e-filing system is designed to be user-friendly, mistakes can still occur. Below are some of the most common errors businesses make when filing their BOIR electronically:
1. Failing to Identify All Beneficial Owners
A major mistake businesses often make is failing to identify all beneficial owners accurately. According to the CTA, a beneficial owner is any individual who, directly or indirectly, owns or controls at least 25% of the company’s equity interests or has significant control over the entity.
Many companies mistakenly omit owners who should be listed, either due to misunderstandings about the 25% ownership threshold or because they have a more complex ownership structure. It’s crucial to identify every individual who meets this definition, including:
- Individuals with direct ownership (those holding at least 25% of the company’s equity).
- Individuals with indirect ownership through other entities.
- Individuals who exercise control over the entity, even if they don’t own 25%.
Failure to include all beneficial owners can result in incomplete filings, leading to penalties.
2. Incorrect or Incomplete Personal Information
A key part of the BOIR e-filing process is providing accurate personal details of each beneficial owner. Common mistakes involve submitting incorrect or incomplete personal information, such as:
- Incorrect names or misspelled names.
- Wrong dates of birth or missing birthdates.
- Inaccurate address information.
- Missing or incorrect government-issued identification numbers (e.g., passport number or driver’s license).
Errors in this section can cause delays in processing and may result in penalties if they are flagged by FinCEN for inaccuracies. Always double-check the personal information for each beneficial owner and verify that it matches their official identification documents.
3. Submitting Outdated Information
After the initial BOIR submission, businesses are required to update their report if there are any changes in ownership. A mistake often made is failing to update the BOIR in a timely manner when ownership or control changes occur, such as when:
- A new beneficial owner is added.
- Ownership percentages change.
- A beneficial owner is removed.
Not updating the BOIR to reflect these changes within 30 days of the change can result in penalties. Companies must track changes in ownership or control and ensure the BOIR is revised accordingly.
4. Failing to Submit the Report on Time
Missing the filing deadline is another common mistake that can lead to hefty penalties. For most companies, the BOIR must be filed within 30 days of formation, registration, or any changes to the ownership structure. Subsequent updates must be filed within 30 days of a change.
Filing late or neglecting to submit the report on time can result in a fine of up to $500 per day for each day the report is overdue. To avoid these penalties:
- Set up reminders or an internal tracking system to ensure timely filing.
- Consider submitting the report well in advance to account for any last-minute issues.
5. Not Understanding Exemption Criteria
Not all entities are required to file a BOIR. The CTA provides specific exemptions for certain types of companies, such as:
- Large operating companies with more than 20 full-time employees.
- Companies that generate more than $5 million in annual revenue and have an operating presence in the U.S.
- Regulated entities like banks, credit unions, and large publicly traded companies.
Many small businesses mistakenly think they are exempt from the BOIR filing requirements. It’s crucial to carefully review the exemption criteria to ensure that your company is required to file the BOIR. If you are exempt, you must still keep records to prove your eligibility.
Best Practices for BOIR E-Filing
Now that we’ve discussed common mistakes, let’s look at the best practices to ensure a smooth and accurate BOIR filing process:
1. Keep Accurate and Updated Ownership Records
Maintaining accurate ownership records is essential for compliance with the BOIR filing requirements. You should:
- Regularly update your ownership records to reflect changes in ownership percentages and control.
- Keep track of changes in beneficial ownership and promptly update your BOIR.
- Maintain documentation of ownership interests, such as shareholder agreements, operating agreements, and other legal documents.
2. Double-Check All Information
Before submitting the BOIR, ensure that all the information is correct, complete, and up-to-date. Double-check the details of each beneficial owner, including their name, date of birth, address, and identification number. Inaccurate or incomplete filings can cause delays and result in fines.
3. Use Professional Help if Needed
The BOIR filing process can be complex, especially for businesses with multiple layers of ownership. If you’re unsure about how to file or have a complicated ownership structure, consider consulting a legal or compliance professional. They can ensure that your BOIR filing is accurate and complete and help you avoid costly mistakes.
4. Monitor Filing Deadlines
Stay on top of the filing deadlines and make sure your BOIR is submitted on time. Set up internal tracking systems to monitor the deadlines for initial filings and any updates required as ownership changes.
5. Take Advantage of E-Filing Tools
The BOIR e-filing system offers several features to make the process easier, including an online platform that guides you through the filing process. Take advantage of these tools to streamline your submission and avoid common mistakes.
6. Stay Informed on Regulatory Changes
The regulations around BOIR filings can evolve, so it’s essential to stay informed about any updates or changes to the rules. Regularly check for updates from FinCEN and consult with professionals to ensure your company remains in compliance.
Conclusion
E-filing the Beneficial Ownership Information Report (BOIR) may seem like a daunting task, but with the right strategies, you can avoid common mistakes and submit an accurate, timely report. By keeping accurate ownership records, double-checking all information, and staying on top of deadlines, your company can ensure full compliance and avoid costly penalties.
At BOIR.org, we understand the challenges businesses face with BOIR e-filing, and we’re here to help guide you through the process. By following these best practices and avoiding common mistakes, you can navigate the BOIR filing system with confidence and keep your company compliant with the law.