If you’re reading this, more than likely you’ve heard some buzz around a new reporting requirement for small businesses. Maybe you had a formal email come through your inbox, or your favorite influencer mentioned some scary new law, or your mom told you to look into this. Either way, I’m glad you’re here because this new legislation is KINDA A BIG DEAL.
“Why is it a big deal” Well, unfortunately there are some pretty costly fines ($500/day late) and the threat of jail time if a business fails to file this new report. So only kinda a big deal (yikes!).
Don’t worry though, I’m breaking down why this is even a requirement and how to file the report for you right here right now!
A little history…In 2021, Congress enacted the Corporate Transparency Act (CTA) which mandated the Financial Crimes Enforcement Network (FinCEN), a part of the US Department of Treasury, to create Beneficial Ownership Information (BOI) reporting laws.
“Why does Congress care?”
To cut to the chase, the ultimate goal of this new requirement is to shine a spotlight on the true wizards behind companies. Imagine you’re watching a broadway show, and suddenly the curtains go up and reveal everyone who is really putting on the show. That’s pretty much what BOI reporting does – it unveils the hidden faces, or shall we say, the beneficial owners, of businesses.
The idea is to promote transparency, accountability, and, ultimately, to combat financial shadiness. By identifying the real players involved in a company, we can prevent money laundering, fraud, and other sneaky business practices.
So the good news is that if you’re not being shady with your business practices, you really have nothing to worry about with this reporting other than making sure you file it on time (more on that below)!
“Okay that’s great…but now how do I know who is a beneficial owner?”
Another great question! Starting with the basics, beneficial owners are the individuals who enjoy the fruits of a company’s success. They might not be the ones signing the papers or attending board meetings, but they reap the rewards. Think of them as the silent partners who sip their coffee while the business does its thing.
For most small businesses (especially in the online creative space), the beneficial owner is only YOU. If you have a business partner or a spouse with you in the business too, then they are also beneficial owners.
The BOI reporting requirements, which are gaining momentum worldwide, are like a global game of financial chess. Countries are aligning their pieces to ensure that everyone plays fair. The idea is to create a standardized approach to reporting beneficial ownership information, making it harder for those with less-than-honorable intentions to hide in the shadows.
Now, the process isn’t as complicated as decoding ancient hieroglyphics. Companies are generally required to collect and report information about their beneficial owners. This information typically includes names, addresses, and a breakdown of ownership percentages. It’s all about shining a light on those who have a stake in the game.
“This all sounds like a great idea but what exactly are the benefits of this requirement?”
Well, apart from deterring financial wrongdoing, it also helps businesses build trust. Imagine you’re considering investing in a company. Wouldn’t you want to know who’s steering the ship? BOI reporting gives you that insight, allowing investors, regulators, and the public to make informed decisions.
Of course, with every change, there are challenges. Some argue that it could be burdensome for businesses to gather and report this information. Others worry about privacy concerns. Striking the right balance between transparency and individual rights is a delicate dance that policymakers are navigating.
As we sail into this new era of financial transparency, one thing is for sure – the tides are changing. Beneficial Ownership Information reporting is becoming a crucial player in the fight against financial crime and a key driver for a more accountable business landscape. So, buckle up because the seas of change are upon us, and it’s time to set sail into a more transparent future.
If I’ve gotten your attention and you’re like “great now how I actually file a report”? Check out this post.