Originally published on February 28, 2024, updated November 1, 2024
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Editor's note: This requirement is currently being worked out in court.
In 2021, US Congress passed the Corporate Transparency Act (CTA), which requires businesses to report clearly who owns or benefits from the business by filing Beneficial Ownership Information (BOI).
The CTA went into effect on January 1, 2024, and most eCommerce businesses will need to file BOI by the end of this year or sooner. Read on to learn more about the CTA, BOI, and how to stay compliant.
The CTA creates a new beneficial ownership information reporting requirement that makes it more difficult for bad actors to work in the background through shell companies or other ownership structures where their identity can be obscured.
I recommend you review the information on the www.Fincen.gov/boi website. There is great information on this page. Generally, it indicates that your company may need to report information about its beneficial owners if it is
1. a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe
OR
2. a foreign company and registered to do business in any US state or Indian tribe by such a filing.
This general guidance is also accompanied by 23 types of entities exempt from reporting. Unfortunately, the exemptions apply to banking and financial service type entities so most eCommerce businesses will have to comply. You can learn more from this Small Entity Compliance Guide. Page one of the document has a decision tree to help you consider your requirements and page four has a list of the exemptions.
If you are required to report, then you will file electronically using FinCEN's BOI E-Filing website.
A beneficial owner is any individual who, directly or indirectly exercises substantial control over a reporting company OR owns or controls at least 25% of the ownership interests of a reporting company.
A reporting company can have more than one beneficial owner; there is no maximum number. On page 16 of the guide, you can dive into the definitions of substantial control, ownership interest, and a three-step process for how you can identify your company's beneficial owners.
FINCEN - The Financial Crimes Enforcement Network, under the US Treasury Department, is responsible for the reporting process.
CTA - The Corporate Transparency Act, which Congress passed in 2021.
BOI - Beneficial Ownership Information refers to information about the individuals who directly or indirectly own or control a company and is the title of the reporting requirement under the CTA.
You will need all the details of your business - full legal name, doing business as (DBA) name, address, and Taxpayer ID Number or Employer ID Number.
For each beneficial owner, you will need the full legal name, date of birth, current address, and a unique identifying number like a US Passport, state driver's license, or an ID document issued by the state, local government, or tribe. Page 38 of the guide gives you a complete checklist.
If your business was established before January 1, 2024, and you meet the criteria, you have until the end of 2024 to file. Any business that meets the criteria and was established after January 1, 2024, has 90 days to file its Beneficial Ownership Information document. Note that in 2025, the reporting requirements change.
I suggest while you're already in "compliance" mode preparing your taxes this spring, you deal with the BOI requirements. Don't leave it until Q4 when your focus turns to sales.
"The willful failure to report complete or updated beneficial ownership information to FinCEN…. may result in civil or criminal penalties, including civil penalties up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fail to file a required BOI report may be held accountable for that failure.”
If you started your business this year, 2024, you had 90 days after you started the business to file. Make sure at this point you have filed before the end of 2024.
This reporting is not difficult, but failing to report carries civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. So, take a minute now and follow along and take care of this task before it slips your mind. Margins are too slim to be playing with these penalties.
To get started you go to the Fincen BOI filing website. If you google the BOI or Fincen, you will see several services that are running ads to file for you. It’s a very straightforward process, so I suggest you try it on your own before you engage someone to do it for you.
Choose either the white box or the blue box. They both take you to the same webpage. For convenience, I will file online and highlight this process in this blog.
Once you select the Prepare and Submit BOIR tab under the WEB option, you get a warning explaining you are entering a US government information system and consenting to their monitoring, recording, and auditing of the information system. The next page displayed asks for you to select the type of filing. I am going with a since my business has not reported before and is not exempt.
The system selected today’s date for me and now I select Next.
On this page, they are gathering information about the company that you are reporting on.
This page gathers the company name, DBA name, tax ID number (leave out the dash), jurisdiction, and address. You will have to scroll down to complete the entire page.
On the next page, you will check box 16 if your business was established before Jan 1, 2024. If you hover over the check box you will learn that by selecting this box, you do not have to complete Part II. Part II is for businesses that were created in 2024. Select Next to proceed to Part III.
Part III is the last section and this is where you will provide the beneficial owner information. Question 35 is required if a minor child is a beneficial owner.
Question 36 is where you can enter a FinCEN ID, but it’s unlikely you will have one if you’ve never filed before.
Question 37 allows you to select that you are exempt. Click the drop-down arrow to learn more on the website and check with your CPA if you have any questions.
Scroll down to find questions 38 – 51 gathering information about the individuals that have an ownership interest in the business.
You will need a state-issued ID, like a driver’s license, a US passport, or a foreign passport, to be added for questions 48-51. You will be required to provide pictures of the IDs, so make sure you have pictures saved on your computer so you can drag and drop them into the form.
Once complete, if you have additional Beneficial Owners, scroll back to the top of Part III and select the button to Add Beneficial Owners. You will note that the first owner’s information is condensed, and you have the option to remove it. You complete this form as before and add each additional owner’s information one at a time.
Once all the business owners are added, click Next and you will be at the final screen where you will submit your information. You can hit the previous button if you want to review anything. Otherwise, share your name and email. Then check the box that you are authorized to file, and the information is true, correct, and complete. You will attest that you are a human, and you are ready to select Submit.
Once you Submit, you will notice that a submission status bar shows your progress. Mine happened very quickly, then a confirmation was displayed, and I got an email confirmation. The page shows you how you can download your transcript. I downloaded it for my records, and I took a screenshot too.
Completing this form took me about 15 minutes, even taking the screenshots for this blog. Unless the ownership structure is complex with many Beneficial Owners, I believe most business owners can easily do this form without engaging professional help. If you have a complex issue or any concerns, check in with your tax professional or dig into the website mentioned above.
Originally published on February 28, 2024, updated November 1, 2024
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.
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