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What Happens After the Initial BOI Report?
As a business owner, staying ahead of regulatory changes is stressed for maintaining compliance and avoiding penalties.
One significant legislative shift that demands your immediate and ongoing attention is the Corporate Transparency Act (CTA). Once you have filed the initial BOI Report for your company, it’s important to realize that CTA reporting is NOT a one-time or even annual requirement.
Updates are required as often as information changes about the company or it’s beneficial owners, and it is mandatory to report these within 30 days of any change.
Companies must establish processes for managing this component of the new requirement, especially as ownership and control structures shift. Because these changes need to be reported as they occur, now is the time to develop a plan of action for timely filing and to consider the new policies and procedures that come with this responsibility.
People are not accustomed to reporting changes in their personal information to the company, such as informing them of a new Driver’s License with a different ID number or a name change after getting married.
Which Changes Require Updated Reporting?
Some other changes that will trigger the need for updated reporting include:
- Modifications in Beneficial Owner Information: Changes in legal name, residential address, and ID numbers from a Drivers License or passport.
Changes about the company or it’s structure will also trigger updates, including:
- Changes in Company Information: Registering a new trade or doing-business-as name or moving to a new business address.
- Alterations in Beneficial Ownership: Appointment of new beneficial owners with substantial control, change in ownership structure – especially if it involves someone reaching or surpassing the 25 percent ownership interest threshold – departure or resignation of a beneficial owner, the death of a beneficial owner, or inheritance of ownership interest.
Considering these changes, the reporting will need to be done promptly. However, it involves more than just filing the report. There are a few things you need to consider to ensure your business complies with the CTA and mitigates their risk of non compliance:
Educating Beneficial Owners (BOs)
Beneficial owners must be informed about their reporting obligations and the necessity to notify the company of any changes in their information immediately, as the company only has 30 days to report this update.
To facilitate this, beneficial owners need to be made aware of the information they must keep up-to-date with the company. Managers and personnel with substantial control, senior officers, and certain BODs are the types of people at a company that should be informed about these update requirements.
It’s also important to inform HR representatives to establish processes for collecting certain information upon hire.
Establishing a regular schedule for verifying current information with beneficial owners – depending on the size and structure of your organization, is a sound strategy.
If your lawyer or CPA is responsible for maintaining compliance, they must also be notified when non-client owners have a change in information. This may involve introducing certain owners to your lawyer or CPA to ensure a clear line of communication for these updates. If not, the engaged owner must communicate with the other beneficial owners and then relay the information to the professional.
Human Resources Coordination
If you haven’t yet discussed this with your HR team or those handling employee relations at your company, now is the time to do so. The HR team needs to be thoroughly familiar with the CTA requirements, especially those related to substantial control roles.
They must ensure that new hires in positions of substantial control are informed about their reporting obligations during the onboarding process, including the collection of necessary personal information as part of their employment documentation.
Beneficial owners are not only the individuals that work at the company but also those who hold at least 25% ownership interests. For example, if your company is owned by someone and their spouse, but the spouse doesn’t work at the company, HR will need to make sure that the spouses information is acquired and maintained.
Additionally, make sure that someone on your team is monitoring any updates or changes in the regulations from FinCEN that may require adjustments to internal processes or reporting procedures.
Establishing New Policies and Procedures
Creating new standard operating procedures (SOPs) is critical for compliance. Develop clear policies outlining the process for updating required information or even updating their FinCEN IDs. Ensure these policies are easily accessible and understood by all relevant parties. Integrate these policies into your hiring and onboarding processes so new hires are immediately aware of their responsibilities.
Ask yourself these questions:
- How often will you remind beneficial owners about the need to make updates? Will you need to provide them resources more than once to educate them?
- Will you proactively ask beneficial owners if they had any changes in their information? Who will do this and how often?
- What is the channel for the beneficial owner to inform the designated individual about any changes to their information?
- Who is responsible for submitting the updated BOI Reports?
- Is HR watching for changes in job descriptions or new roles that might give someone substantial control, thus requiring an updated report including that individual as a beneficial owner?
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Since some updates will need to be made through the individuals’ login.gov accounts – if they have a FinCEN ID – it’s essential to ensure that beneficial owners maintain secure access to their accounts and understand how to promptly update their information. Develop policies to verify that the update was made in their account correctly and on time to ensure the company has met its responsibilities.
Responsibility for Filing Updates
Determine who will be responsible for filing updates with FinCEN. Will it be a business owner, CPA, or another designated individual? Clear delegation can prevent lapses in compliance.
A major consideration for ensuring personal information gets reported is when individuals obtain a FinCEN Identifier. When an individual gets a FinCEN ID, the company’s ability to file certain updates may be restricted.
This is because once an individual has a FinCEN ID and uses it on the BOI Report in place of their required information, they can only update their information through their login.gov account. For instance, an individual should inform the company of a change in their home address, but they will be responsible for reporting that change in their login.gov account.
If they hadn’t obtained a FinCEN ID, the change in address would be reported by the company in an updated BOI Report. Companies need to carefully consider this because BOI Reporting is their responsibility to ensure all reported information is accurate. Implementing a system to verify that beneficial owners have actually filed their information with FinCEN might involve collecting proof of submission from the individuals.
If you find yourself needing to file many updates during the year or you’re not sure how many you will need, it’s not too late to consider using a software to enhance management even reduce the amount of time it takes for ongoing CTA compliance.
Software solutions, like Secure Compliance, are designed to collect, store, and manage personal information securely. This can streamline the process, provide a channel for owners to report their updated information, and ensure that data is easily accessible when needed. Our software also ensures that personal information remains in our software, not on the company’s servers.
Reporting software can also reduce the number of times you need to reenter information.
When using the FinCEN website or some other software, you have to reenter all details of the report, even if the update is just one address of a beneficial owner.
For companies with multiple related entities or even for just one entity with continuously changing information, software can store the owners’ information so you don’t have to enter the same person on each report—enter it once and tie it to all desired entities or change the one item of information and file.
Secure Compliance subscriptions also offer unlimited updates, so you won’t have to worry about how many updates or corrections you’ll need to file throughout the year.
The CTA introduces new complexities for business owners, but with careful planning and the right tools, you can navigate these changes successfully. By establishing clear procedures, leveraging professional assistance, and utilizing technology, your business can stay compliant and avoid the potential pitfalls of this new regulatory landscape.
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