Beneficial Ownership Information (BOI) FAQ for Startup Founders

FAQ for StartupFounders about BOI

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If you're a startup founder with a C Corporation, it's crucial to stay informed about the evolving requirements for the Beneficial Ownership Information (BOI) Report under the Corporate Transparency Act (CTA). Here's what you need to know:

Current Status of BOI Reporting Requirements

As of December 9, 2024, the BOI reporting requirement is on hold due to a preliminary injunction. However, the government has appealed this decision, and the situation could change rapidly. It's essential to stay updated and be prepared to comply if the original deadline is reinstated.

Frequently Asked Questions

Who needs to file a BOI report?

Most early-stage startups structured as corporations are required to file a BOI report if they meet the following criteria:

• Have 20 or fewer full-time employees.
• Less than $5 million in sales.
• Are entities created by filing with a Secretary of State, tribal jurisdiction, or similar office.

Organizations with more than 20 full-time employees and over $5 million in annual gross receipts are generally excluded from reporting requirements.

What is a beneficial owner?

A beneficial owner is any individual who, directly or indirectly:

• Exercises substantial control over a reporting company (meaning they can make important decisions for the company).
• Owns or controls 25% or more of the company.

What constitutes substantial control?

An individual exercises substantial control if they:

• Serve as a senior officer (e.g., president, CEO, CFO).
• Have authority to appoint or remove certain officers or a majority of directors.
• Are an important decision-maker for the company.
• Have any other form of substantial control as defined by FinCEN.

When is the BOI filing due?

For companies incorporated before January 1, 2024, the BOI report was initially due by January 1, 2025. For those incorporated after January 1, 2024, the report is due within 90 days of incorporation. However, due to the current legal proceedings, these deadlines may be subject to change.

What are the penalties for not filing?

Willfully failing to file the BOI report can result in civil penalties of up to $500 per day for each day the violation continues. Criminal penalties may include fines up to $10,000 and imprisonment for up to two years.

How often do I need to update my BOI report?

You must update your BOI report within 30 days of any change in beneficial ownership information, such as:

• Change in business address.
• Beneficial owner changes their address or name.
• Renewal of a beneficial owner's identification documents.
• A beneficial owner reaches the age of majority.

Why was the Corporate Transparency Act enacted?

The CTA aims to combat illicit activities like money laundering and terrorism financing by requiring companies to disclose their beneficial owners, thereby increasing transparency and preventing the misuse of shell companies.

Can I file the BOI report on my own?

Yes, you can file the BOI report independently at no cost. Here is a guide from Fondo with step-by-step instructions are available to assist you in the filing process.

Next Steps for Founders

• Stay Informed: Monitor updates on the legal proceedings affecting the BOI filing requirements.
• Be Prepared: Gather all necessary information to file the BOI report promptly if required.
• Consult Professionals: Seek advice from legal or accounting professionals to ensure compliance and understand how these requirements impact your startup.

Navigating regulatory requirements can be complex, but staying proactive will help ensure your startup remains compliant and avoids potential penalties.

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Disclaimer

This blog for informational purposes only and does not constitute legal or tax advice or create an attorney-client relationship. Companies should consult their own attorneys or tax accountants for advice on these issues. Because of the generality of the issues discussed in this piece, the information provided may not apply in all situations and should not be acted upon without specific legal or tax advice based on particular situations.