What Dry Cleaners Should Know About New Reporting Requirements (Conclusion)

NASHVILLE, Tenn. — The federal government recently passed the Corporate Transparency Act (CTA), which went into effect on January 1. This requires most small companies to file what is called a Beneficial Ownership Information, or BOI, report with a federal agency called the Financial Crimes Enforcement Network, which is better known as FinCEN.

The CTA was the topic of a recent webinar, “Beneficial Ownership Reporting is Here: What Small Business Owners Need to Know about the New Reporting Requirements,” hosted by the National Federation of Independent Business (NFIB). In the webinar, Sandra Feldman, attorney and beneficial ownership information reporting expert with Wolters Kluwer CT Corporation, offered information about the new requirement, along with information about filing and penalties in the event of violations.

In Part 1 of this series, we looked at what the Corporate Transparency Act is and the role FinCEN plays in gathering Beneficial Ownership Information (BOI). In Part 2, we examined who beneficial owners are when it comes to this discussion and what goes into the BOI report. Today, we’ll conclude by detailing how to submit BOI reports for your company, along with potential penalties if this requirement isn’t followed.

Where and How to File

So, once a business owner knows they need to file a BOI, where and how does this happen?

“All BOI reports are filed electronically with FinCEN,” Feldman says. “There is no state filing. You only file with FinCEN. There is no fee, and the report can be filed by anyone the reporting company authorizes to act on its behalf.”

For those who file on their own behalf, Feldman says they can go to the BOI e-filing portal, located on the FinCEN website (https://www.fincen.gov). “When you go to the portal,” she says, “you will see a couple of options. You can download a PDF, fill it out and then upload it and submit it to FinCEN, or you can use their web-based version, fill the report out online and then submit it.”

There is also the option of using a third-party service provider, who will take the information and submit it on the company’s behalf. While these providers will charge a fee, potential advantages to this, Feldman says, include simplified data collection and confidence in the filing. “It’s an option you should at least investigate before filing your company’s initial report,” she says.

“However you choose to file your report, you’ll notice that there’s just one BOI report form,” Feldman says. “There aren’t separate forms for initial, updated or corrected reports. You’ll be asked to check a box indicating whether you’re filing an initial report, correcting a prior report, updating a prior report, or if you’re reporting that your company is newly exempt. And when you file an update or correction, you have to complete the entire BOI report form. You don’t just provide the updated or corrected information — you resubmit all the information.”

FinCEN Identifiers

FinCEN also offers something it calls a FinCEN identifier, which is a number unique to each beneficial owner.

“It is an option that FinCEN gives the beneficial owners and company applicants,” Feldman says, “whereby they can submit an application to FinCEN containing the personal information that’s required to be reported — their name, date of birth address, unique identifying number and image of identifying document. FinCEN will then give that individual a 12-digit number specific to that individual called a FinCEN identifier.”

What’s the advantage of a FinCEN identifier?

“That beneficial owner or company applicant can give the reporting company their FinCEN identifier, and the reporting company can include that 12-digit number candidates viewer report in place of the required four pieces of information,” Feldman says. “It’s particularly beneficial for someone who is a beneficial owner or company applicant of several reporting companies. Instead of having to give multiple companies their personal information and images of their driver’s license or passport, they can just give the company their FinCEN identifier.”

Violation and Penalties

So, what are the penalties for violating this new requirement, and what are considered violations?

“Violations include willfully failing to file a complete initial, updated or corrected BOI report,” Feldman says, “and willfully filing or attempting to file false or fraudulent beneficial ownership information.”

Potential penalties include a civil penalty of up to $500 for each day the violation continues. Criminal penalties of up to two years imprisonment and a fine of up to $10,000.

“Both individuals and reporting companies can be held liable,” Feldman says, “and individuals can be held liable if a reporting company failed to report complete or updated beneficial ownership information, and that individual either caused the reporting company’s failure or was a senior officer at the time of the failure.”

Getting Ready for FinCEN

Feldman offered some tips for preparing for BOI reporting for owners and other stakeholders.

“First, you should determine if your small business is a reporting company, and therefore has to file a BOI report,” she says. “If you do have a reporting company, you need to identify all of your beneficial owners. The beneficial owners need to be made aware of the requirements of the Corporate Transparency Act, and that their personal information will have to be reported to FinCEN and kept up to date.”

A major element of staying up to date includes putting systems into place.

“You should also start gathering the information that has to be reported and develop a procedure to keep track of all this information to make sure it’s current when you file your initial report,” she says, “and that you’re aware of any changes that will require you to file an updated report.”

For more information, Feldman suggests the CTA/BOI reporting resources page at https://www.fincen.gov/boi. “They have a lot of really good resources, including a small entity business guide, FAQs and videos.”

She also suggested going to her own company’s website, https://www.wolterskluwer.com, “which also has articles, podcasts, webinars and even a quiz to help you determine if you have to file.”

For Part 1 of this series, click HERE. For Part 2, click HERE.