Filing May Be Easy but BOI Analysis is Hard

The BOI reporting requirements go beyond basic business filings and require a thorough examination of ownership structures to determine who truly holds beneficial ownership according to FinCEN’s definitions.

May 16th, 2024 • 5 min read

Understanding the Challenges of FinCEN BOI

For entities wholly owned and controlled by a single individual, the reporting process might appear straightforward. However, this scenario is more the exception than the norm. Most entities feature complex ownership structures that require detailed analysis to accurately identify Beneficial Ownership Information (BOI). FinCEN regulations define “beneficial owners” as individuals who directly or indirectly:

exercise “substantial control” over the company which includes managers, officers, and other individuals who can make important decisions for the company.
own at least 25% of the company or

Analyzing your BOI: Components and Misconceptions

A key component to FinCEN’s definition of beneficial owner is the term “indirectly”. Including individuals who indirectly own or exercise substantial control over a company significantly expands the pool of potential beneficial owners. To comply with FinCEN BOI Reporting, it is essential to analyze not only the direct owners but also those higher up in the organizational structure.

A common misconception is that if one entity within a company’s ownership structure is exempt from BOI Reporting, then all related entities are also exempt. This is often not the case. Each entity and its subsidiaries must be individually analyzed to determine their BOI Reporting requirements. In industries like real estate, joint ventures between general and limited partners are commonly formed to finance and acquire projects. However, one partner's exemption does not extend to the other. This necessitates gathering detailed information not only from your entity but also from your joint venture partners, adding an extra layer of complexity to the process.

Navigating Regulatory Requirements

To determine their BOI, companies must carefully review the regulations and determine how to apply them to their specific circumstances. Given the complexity of these regulations, FinCEN has provided additional resources including FAQs, small entity guides, and other explanatory materials, to help companies navigate the intricate nuances. This level of regulatory review and analysis surpasses the services typically offered by registered agents. You really need lawyers to perform the BOI analysis.

Who Can Help?

Many companies struggle to determine who is best suited to help them identify their BOI. Law firms often avoid performing BOI analysis due to the high cost associated with billable hours given the complexity and number of entities involved. Accounting firms often avoid performing BOI analysis because interpreting the regulations constitutes practicing law. Ultimately, the responsibility to accurately identify BOI falls on the company itself, leading to anxiety as businesses seek a suitable solution to complete their BOI analysis.

The Right Solution

While analyzing your BOI can be daunting due to complex ownership structures and extensive regulatory requirements, the right FinCEN BOI Reporting solution can simplify the process by:

Efficiently and securely collecting information about your company; and
Relieving the burden of understanding the nuances and complexity of the FinCEN’s regulations by analyzing your BOI for you, and
Filing your BOI Reporting with FinCEN, and
Organizing and storing your company’s information to make reporting future changes to FinCEN simple and efficient.