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7 Common BOI Reporting Mistakes and How to Avoid Them

The filing of a BOI report is one of the major requirements for businesses under the Corporate Transparency Act. However, most companies make certain mistakes that may lead to fines, compliance issues, or even unnecessary complications.

Understanding these common mistakes and how to avoid them can ensure a smooth and accurate filing process.

1. Failure to File a BOI Report on Time

One of the most common mistakes a business can make is failing to file BOI reports on time. According to FinCEN, companies must report this beneficial ownership information within the timelines set forth by the rule.

How to Avoid It:

  • Mark your calendar and set reminders when the BOI report is due.
  • From time to time, check on FinCEN’s website for new deadlines and updates.
  • If you are forming a new entity, be mindful of initial filing requirements.

2. Incomplete/Incorrect information on Filing

The BOI report requires complete information of the beneficial owners- full name, address, date of birth, and a unique identifying number such as FinCEN ID or a passport number. Many firms file reports with incomplete or inaccurate data.

How to Avoid It:

  • All entries are double-checked before filing.
  • Ownership percentages and control structures should be correctly checked.
  • Use official documents to verify the information that is needed.

3. Failure to Properly Identify a Beneficial Owner

A beneficial owner is any individual who directly or indirectly owns or controls at least 25% of a company or has substantial control over it. Businesses sometimes fail to identify all relevant owners, leading to an incomplete filing.

How to Avoid It:

  • Review FinCEN’s guidelines on definitions of beneficial ownership.
  • Consult legal or compliance experts to ensure correct identification.
  • Update ownership records regularly to reflect any changes.

4. Not Keeping BOI Records Updated

Companies should report changes in beneficial ownership within the required timeline. Non-update of BOI reports leads to non-compliance.

How to Avoid It:

  • Put in place a system that keeps track of changes in ownership.
  • Inform concerned stakeholders to update records, if necessary.
  • Periodically review company structure for any reportable changes.

5. Assuming Your Business is Exempt

Certain businesses, such as publicly traded companies and regulated financial institutions, may be exempt from BOI reporting. However, assuming exemption without determining eligibility will result in non-compliance.

How to Avoid It:

  • Check the list of exempt entities maintained by FinCEN.
  • Seek the advice of counsel if the status of your company is not clear.
  • If the criteria for exemption change, modify your compliance process accordingly.

6. Filing the BOI Report Through Unofficial Channels

Some businesses inadvertently file their BOI report through third-party platforms not recognised by FinCEN, risking data security and possible rejections in the process.

How to Avoid It:

  • Only use FinCEN’s official online portal for BOI submissions.
  • Avoid third-party services unless they are verified compliance professionals.
  • Keep records of submission confirmations for future reference.

7. Ignoring Possible Penalties for Non-Compliance

Failure to file a BOI report or furnishing false information could attract serious penalties, including fines up to $10,000 or imprisonment.

How to Avoid It:

  • Treat BOI reporting as a necessary evil to ensure compliance.
  • Invest in compliance training for your people.
  • Engage professionals to ensure that filings are prepared correctly and in a timely manner.

Conclusion

BOI reporting is a very critical regulatory requirement, which needs due diligence and accuracy. Understanding the common mistakes coupled with best practices will help a business stay compliant and avoid unnecessary penalties. Monitoring deadlines, verification of beneficial ownership, and the use of official channels are critical in ensuring a seamless filing process. Prioritise compliance today to protect your business from future legal challenges.


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