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Your Guide to Choosing a BOI Reporting Solution
Facts and Considerations to Know Before You Report
The Corporate Transparency Act (CTA) has introduced new reporting requirements that affect almost all organizations operating in the US. The CTA mandates that organizations report beneficial ownership information (BOI) with the Financial Crimes Enforcement Network (FinCEN), an agency of the US Department of Treasury. Failure to properly report can lead to severe penalties, including fines of up to $10,000 and even imprisonment.
Many organizations are seeking ways to simplify the reporting process. This guide explores the considerations that business owners need to make an informed decision.
Facts to Know
Before getting into the specific considerations of what to look for in a provider, it is important to understand these fundamental facts about BOI reporting.
Remember, beneficial owners are individuals with substantial control and/or ownership of an entity. FinCEN expects reporting companies, i.e., entities not exempt from the requirement, formed prior to 2024 to report information about these owners before the end of the year. While reporting companies formed in 2024 have just 90 days to submit an initial BOI report. Beyond those basic facts, keep in mind that:
BOI reports are not one-time filings
After submitting the initial report, organizations must keep their information current. Generally, FinCEN must be notified of information changes via additional updated or corrected reports within 30 days of the change occurring.
BOI reports contain personally identifiable information (PII)
The BOI filing requires sensitive information, which poses a data breach risk when collected through email or other unsecured means.
Changes to BOI occur frequently and for many different reasons
Triggers for updated BOI reports include, but are not limited to:
- A beneficial owner changing their name
- A beneficial owner moving residences
- A reporting company's name changing
- A reporting company's place of business changing
- etc.
Most CPAs, attorneys, and advisors won't complete filings for their clients
Many business owners may not be aware of the new requirements for filing BOI reports. Some may assume that their accountant or attorney will manage these reports for them. However, after consulting with our tax and legal partners, it appears that few of these firms intend to complete BOI reports for their clients. The reasons behind this are varied. For CPAs, there are concerns about their professional services insurance policies covering them in the event of an incorrect filing. Additionally, they could be seen as engaging in unlicensed practice of law if they advise clients which of their staff will be considered beneficial owners. On the other hand, attorneys generally prefer providing higher-value legal guidance. In general, organizations should expect to either file the reports independently or work with a third-party vendor to complete them.
From a risk perspective, it's better to overreport than underreport
FinCEN's Small Entity Compliance Guide explains that failing to report complete or updated beneficial ownership information to FinCEN, or deliberately providing false or fraudulent beneficial ownership information may lead to civil or criminal penalties. The penalties for such violations include civil penalties of up to $500 for each day that the violation continues, and criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000. It's important to note that senior officers of an entity that fails to file a required BOI report may also be held accountable for that failure.
However, reporting BOI, even if it's not required, incurs only the resources it takes to submit the filing. If it's later determined that your report was unnecessary, it can easily be corrected via an updated report.
Key Considerations
Now that you understand baseline facts about BOI reporting, we’ll cover the factors you should consider before filing.
Managing BOI Reporting Internally Versus Outsourcing
As previously mentioned, more than 30 million organizations in the US are required to submit BOI reports. Failure to comply may result in severe civil and/or criminal penalties. Therefore, every organization must decide whether to complete the report on its own or outsource it to a vendor. Before making a decision, it is important to ask yourself these questions.
Can I collect the required information securely?
It's simple enough to determine what information you need to collect. FinCEN provides guidance on what is required of each reporting company, beneficial owner, and company applicant. You can also read about the required details in our article here. However, collecting it can be complicated.
For one, it's risky to email PII among team members or link attachments in shared folders, spreadsheets, or documents. The emails and files could be intercepted, compromising their contents. Additionally, dealing with multiple entities and owners can drastically increase the amount of information you need to collect. Rather than storing BOI in email inboxes and spreadsheets, a more robust solution is needed.
Also, consider that beneficial owners may prefer to share their PII only with the government as required. To accommodate them, you’ll need a system that prevents unauthorized access to the report information.
Tip: At a minimum, you need a secure space to gather the required information. And, if you're dealing with multiple entities and owners, they should all be able to contribute information without it being inadvertently revealed. Consider that if there are multiple beneficial owners or company applicants, it may be impossible to prevent disclosing PII among them without a third-party provider.
Do I have the time to complete the filing on my own?
Given the sensitive nature of BOI reporting, most business owners will attempt to complete the filings independently. Delegating BOI reporting to staff would mean exposing them to the PII of beneficial owners, which is generally not advisable. Note that FinCEN estimates initial BOI reports take up to three hours to prepare on average.
You should also be aware of the challenges many independent filers report having with FinCEN’s Beneficial Ownership Secure System, or BOSS. We’ve received feedback that the portal isn’t particularly user-friendly. There have been reports that the website may time out resulting in lost data.
Tip: If you plan to handle the report independently, ensure you've set aside adequate time to complete it. Beware of the opportunity cost of such a decision.
Do I have a system for monitoring changes to the information I report?
As discussed above, FinCEN requires organizations to report changes to BOI within 30 days of the change occurring. While changes to your organization's name, address, etc., may be easy enough to track, you'll also need to keep close tabs on the PII of your beneficial owners.
Tip: Establish a calendar system to remind yourself to check in with beneficial owners to avoid falling behind on changes to their reported information.
Can I effectively keep tabs on changes to BOI reporting requirements?
Like all regulations, BOI reporting requirements are subject to occasional change. You'll need to keep tabs on FinCEN's processes and the Corporate Transparency Act in general. For example, consider the NSBA court case and its potential implications for BOI reporting going forward.
Tip: Make monitoring changes to BOI reporting a part of your regular routine. However, as with completing the report itself, consider how much time you'll invest in researching changes to the requirements and the opportunity cost it presents.
Choosing a Compliance Partner
As mentioned previously, managing BOI reporting in-house can be quite challenging. Apart from the obvious data security issues, the cost of investing resources to submit the report and manage it on an ongoing basis can also be significant. As a result, many business owners are opting to outsource their reporting management.
Although there are numerous options available in the market, it's important to consider a few key factors before choosing a vendor. Keep reading to learn what these factors are. Before settling on a partner, you should ask yourself these questions.
Is a new BOI vendor or an established compliance provider better for my organization?
In response to the new regulations, dozens of businesses have launched solutions to the BOI reporting requirement. Many of these solutions are offered by brand-new, untested businesses that offer little else besides BOI reporting tools.
Business owners must consider that collecting, storing, and filing information with government agencies is a complex process that can't be mastered overnight.
While working with a vendor that's narrowly focused on BOI reporting may seem like a good idea, be sure to understand their track record.
Tip: Partner with an established compliance provider with a proven track record of collecting, storing, and filing information with government agencies.
What's most beneficial to my organization, a vendor with a strict focus on BOI reporting or broader compliance capabilities?
Working with a vendor that's narrowly focused on BOI reporting seems like a good idea. In theory, unencumbered by distractions, they should be able to provide a superior solution. However, it's important to recognize how interconnected regulatory requirements can be.
Consider that much of the information used in completing BOI reports overlaps directly with the information contained in corporate records and used in maintaining secretary of state registrations.
Ideally, you choose a compliance partner that's already in possession of your entity registration details and corporate records. Organizations offering BOI reporting services that support corporate records and entity management are ideally positioned to use the information they already have access to to complete BOI reports.
You should also consider that BOI reporting is just one regulation among many impacting your organization. Adding an entirely new vendor simply to handle your BOI reporting is inefficient. By consolidating your compliance in a single vendor, your accounts payable becomes easier to manage and your overall compliance program is simplified.
Tip: Ideally, select a vendor that supports your needs beyond BOI reporting. Ensure your chosen compliance partner can manage both your secretary of state registrations and corporate records requirements. Centralize your regulatory requirements with a single provider to streamline your process and save money.
Do I understand what aspects to consider when examining how a vendor collects BOI?
Information collection is one of the biggest challenges in meeting BOI reporting obligations. Remember, the number of beneficial owners you must report is theoretically limitless. Additionally, entities formed in 2024 and beyond must report information on up to two company applicants. Whatever solution you choose, it's vital that it can support information collection from multiple individuals.
As discussed, the data required to complete a BOI report is PII - personal identifiable information. It includes names, addresses, dates of birth, copies of official identification, etc. To securely collect data like this, your chosen solution will ideally send a dedicated web-based information collection form to each of your beneficial owners and company applicants as needed. The recipient should be able to enter their information directly into that form securely.
It's also important to remember that this process will be unfamiliar to your team since it's so new. Any information collection form must be as user-friendly as possible. Design and instructions must be intentional and clear. And, from a usability perspective, it should allow a user to save partial progress in case the user needs to step away before submitting the form.
Tip: Identify a tech-enabled vendor able to seamlessly collect information from as many individuals as necessary. Ensure the technology prevents third parties from seeing the information unnecessarily. Be sure that it is as user-friendly as possible. Ideally, the solution will optionally accommodate the use of a centralized point person ultimately responsible for coordinating information collection.
How will the vendor help my organization meet its updated and corrected reporting obligations?
As we've already established, keeping reported information up to date is a key component of meeting the Corporate Transparency Act's requirements. This is done by submitting updated or corrected reports in case of a change.
Updated and corrected BOI reports require all of the same information as initial reports. Therefore, storing all of the information originally reported is necessary to clarify what elements have changed.
Whatever solution you choose should store the information you last reported and allow you to update just the pieces of information that have changed.
Ideally, if you've chosen a managed service provider, additional updated and corrected reports will be included in the scope of your service.
Tip: Select a vendor that stores your reported information from one filing to the next. Ensure it supports overwriting of previously reported information and tracks changes so it's clear what has been updated and when. Strongly consider choosing a managed service provider that will handle additional reports beyond the initial submission.
What are my organization’s needs in terms of customer support?
Since the requirement is so new, business owners will inevitably have questions about the BOI reporting process. Confirm that the vendor you choose has support available to help answer your questions and doesn't stop at providing help articles.
Tip: Choose a vendor that provides support both via phone and email. While help articles are nice, helpful support staff are far more efficient in identifying challenges and addressing your concerns.
How will my BOI reporting provider partner with my existing vendors?
While few accountants and attorneys will complete BOI reports, they'll commonly want to be kept apprised of your filing progress. Depending on the nature of your relationship with your advisors, they may even want direct access to the vendor portal to monitor the reports directly. The ability to team effectively with your accountants, attorneys, and consultants is a key consideration in choosing a vendor.
Tip: Opt for a compliance partner with a long track record of partnering with attorneys, CPAs, consulting firms, and service businesses. Ensure they can grant your advisors access to the BOI reporting portal as needed.
Benefits of Centralized Compliance
To prepare for business growth and capitalize on opportunities, it's important to partner with a tech-savvy provider of compliance services. Experience the technological expertise of Harbor Compliance in delivering BOI reporting solutions that make your compliance journey seamless and secure.
Harbor Compliance has always been ahead of the curve in providing compliance services. Since its establishment in 2012, the company has excelled in collecting information securely and integrating with government bodies, aiming to deliver accurate filings without delay. And, Harbor Compliance has a proven track record of successful partnerships with CPAs, attorneys, and service companies across multiple sectors.
About Harbor Compliance
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- Serving the industry for 12 years.
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