With the implementation of the Corporate Transparency Act (CTA) under the broader framework of the National Defense Authorization Act for Fiscal Year 2021, many small businesses are questioning whether they are required to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). BOI reporting requirements are effective as of January 1, 2024. For small plumbing companies and similarly-structured businesses, understanding these requirements is crucial to avoid penalties and ensure compliance.

What is Beneficial Ownership Information (BOI)?

Beneficial ownership refers to the individuals who own or control a significant portion of a business. Specifically, FinCEN defines a beneficial owner as someone who directly or indirectly owns or controls 25% or more of the entity or who exercises substantial control over it. The BOI report must detail these individuals, including their full legal name, date of birth, residential address, and an identifying number from an acceptable identification document (such as a passport or driver’s license).

Who Needs to File a BOI Report?

Under the CTA, most corporations, limited liability companies (LLCs), and similar entities formed or registered to do business in the United States are required to file BOI reports. This requirement is part of a broader effort to increase transparency and combat financial crimes, such as money laundering and terrorism financing.

Does a Small Plumbing Business Qualify?

To determine whether a small plumbing business needs to file a BOI report, it’s essential to consider its legal structure and size:

1. Legal Structure: If the plumbing business is structured as a corporation or an LLC, it will generally be required to file a BOI report. Sole proprietorships and general partnerships are typically exempt from this requirement unless they have elected to be treated as a corporation or LLC for tax purposes.
2. Size & Nature of Business: The CTA provides certain exemptions, primarily aimed at larger, regulated entities. However, small businesses, including plumbing companies, do not fall under these exemptions. Thus, if a plumbing business is structured as a corporation or LLC, it must file a BOI report regardless of its size.
3. Beneficial Ownership: The business must identify and report its beneficial owners. For many small businesses, the beneficial owners are often the same individuals who manage and operate the business. For instance, if a small plumbing business is owned and operated by one or two people who own more than 25% each, these individuals must be reported.

Filing Requirements and Deadlines

Businesses required to file BOI reports must do so within specific deadlines. New entities must file the report at the time of formation or registration, while existing entities have a set period to comply once the regulations take effect. It’s crucial for small plumbing businesses to stay informed about these deadlines to avoid penalties. Not sure when a BOI report is due for your small business? Ask Propel!

Consequences of Non-Compliance

Failing to file a BOI report, filing an incomplete report, or providing false information can result in significant penalties:

• Civil Penalties: Businesses can face fines of up to $500 per day until the violation is corrected.
• Criminal Penalties: Willfully failing to file or providing false information can result in fines up to $10,000 and/or imprisonment for up to two years.

Steps for Compliance

To ensure compliance, small plumbing businesses should:

1. Identify Beneficial Owners: Clearly determine who meets the criteria of beneficial owners within the business.
2. Maintain Accurate Records: Keep detailed records of beneficial ownership information.
3. Submit Timely Reports: File the BOI report within the required deadlines.
4. Seek Professional Guidance: Consult with professionals to ensure all aspects of compliance are met.

Yes, a small plumbing business structured as a corporation or LLC does need to file a Beneficial Ownership Information report with FinCEN. Understanding the requirements and taking proactive steps to comply can help avoid significant penalties and ensure the business operates within the legal framework established to combat financial crimes. By adhering to these regulations, small plumbing businesses contribute to a more transparent and secure financial environment.

Want to avoid penalties and potentially costly mistakes? Let Propel file your BOI report for you! Our team of business compliance specialists can give you peace of mind by staying on top of ongoing FinCEN requirements on behalf of your business – so you can instead focus on the work at hand. Simply say hello and speak with an expert today!