BENEFICIAL OWNERSHIP INFORMATION REPORT – MANDATORY NEW REPORTING REQUIREMENT
NEW REPORTING REQUIREMENT:
Simply put, most small to medium sized companies are now required to identify all individuals who exercise substantial control over the company. An existing company must file its initial Beneficial Ownership Information Report by December 31, 2024. Supplemental Reports are required to be filed if there are any changes to the ownership or management of the company.
(Please see below if your company is created after January 1, 2024.)
Among other information, the Report requires a Federal Employer Identification Number, the residential address of all relevant persons, and a copy of a government-issued photo ID.
DEFINITIONS:
A. “Company” – Corporation or Limited Liability Company
B. “Substantial Control” – An individual exercises substantial control over a company if the individual meets any of following four general criteria:
1) The individual is a corporate officer or manager of an LLC;
2) The individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
3) The individual is an important decision-maker; or
4) The individual has any other form of substantial control over the company.
C. “Beneficial Owner” – A beneficial owner is any individual who, directly or indirectly:
1) Exercises substantial control over the company; or
2.) Owns or controls at least 25 percent of the ownership interests of a company.
An individual might be a beneficial owner through substantial control, ownership interests, or both. A company can have multiple beneficial owners. For example, a company could have one beneficial owner who exercises substantial control over the company, and a few other beneficial owners who own or control at least 25 percent of the ownership interests of the company. A company could have one beneficial owner who both exercises substantial control and owns or controls at least 25 percent of the ownership interests of the company. There is no maximum number of beneficial owners who must be reported. There is no limit to the number of individuals who can be reported for exercising substantial control.
D. “Beneficial Ownership Information Report” – BOI Report
SPECIFIC INFORMATION REQUIRED:
Among other information, the Report requires a Federal Employer Identification Number, the residential address of all relevant individuals, and a copy of a government-issued photo ID for each Beneficial Owner.
The initial Report must by December 31, 2024. Additionally, a supplemental Report must be filed any time there are any changes to the ownership or management of the company.
PENALTIES FOR NON-REPORTING:
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties, including 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. Corporate officers of a company that fail to file a required BOI Report may be held accountable for that failure.
Providing false or fraudulent beneficial ownership information could include providing false identifying information about an individual identified in a BOI Report, such as by providing a copy of a fraudulent identifying document or photo ID. Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI Report or to report incomplete or false beneficial ownership information to FinCEN.
REQUIREMENTS FOR BUSINESS ENTITIES CREATED AFTER JANUARY 1, 2024:
If your company is created or registered to do business in the United States on or after January 1, 2024, and before January 1, 2025, it will have 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective to file its initial BOI Report. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of the company’s creation or registration, whichever is earlier. In Illinois, the effective date of the registration is stamped on the Articles of Incorporation or Articles of Organization.
If your company is created or registered on or after January 1, 2025, it will have 30 calendar days from actual or public notice that its creation or registration is effective to file its initial BOI Report.
What Is An EEO-1 Annual Report Anyway?
The EEO-1 Component 1 Report (also known as “Standard Form 100”) is a mandatory annual data collection that requires certain employers to submit information regarding their workforce.
All private-sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting specific criteria, must complete an EEO-1 Report annually.
The EEO-1 Report relates to equal employment opportunities (hence “EEO”) and requires relevant employers to submit demographic workforce data, including data by race/ethnicity, sex and job categories.
The data submitted is kept confidential by the EEOC unless companies choose to voluntarily disclose it.
Although all U.S. employers of 15 employees or more must comply with Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex and national origin”, only certain employers need to submit an EEO-1 Report to evidence the make-up of their workforce.
Who files an EEO-1 Report?
You need to file an EEO-1 Report if you are:
- A private employer with 100 or more employees.
- A federal government prime contractor or first-tier subcontractor with 50 or more employees and a federal contract/subcontract amounting to $50,000 or more.
- A company with 50 or more employees that serves as a depository of Government funds or as a financial institution which is an issuing and paying agent for U.S. Savings Bonds and Savings Notes.
- An employer with fewer than 100 employees but that is associated with other company(s) or a parent company where the entire enterprise employs 100 or more.
EEO-1 Reporting Checklist
The following seven steps to EEO-1 reporting are designed to walk you through what you need to do:
- Eligibility. Determine if you need to submit an EEO-1 Report (see ‘Who has to file an EEO-1 Report?’ above)
- Form. If you haven’t filed an EEO-1 Report before, register as a first-time filer online on the EEOC’s website at EEOC.gov.
- Data identification. Familiarize yourself with the data that needs to be collected. This includes, for the company and each location or division:
- Company name
- Physical address (of headquarters)
- EIN NAICS Code DUNS, if the organization is a federal contractor.
- The workforce snapshot pay period used.
- Number of employees at the prescribed levels above, in each of the prescribed categories
- Identify your data sources. Where will you find the data you need to include in the form? What internal systems and data sources will you need to search?
- Delegate. Allocate responsibility for gathering the data and submitting the Report.
- Assemble. Gather data, collate if needed, check for accuracy and submit in time to meet the deadline. Looking at an EEO-1 sample report will help by giving you an example EEO-1 Report on which to base your reporting.
- Retain a copy of the Report for at least one year for audit purposes.
How to File Your EEO-1 Report
Once you have determined that you need to file an EEO-1 Report, you’ll need to know how to submit the Report.
The EEOC prefers organizations to submit their EEO-1 Component 1 Reports online. This is done either:
- Via the EEO-1 Component 1 Online Filing System, or
- As an electronically transmitted data file (TEXT or CSV) via a data file upload If you’re filing for the first time, you need to register with the EEOC before you can file your EEO-1 Component 1 Report.
You will be provided with a company I.D. and password.
When Is the EEO-1 Report Due by Year
Year is the year data relates to the EEO-1 Report filing due date.
Year EEO-1 Report Filing Due Dates
2023 TBD
2022 December 5, 2023
2021 May 17, 2022 (Tentative)
2020 October 25, 2021 (extended)
2019 October 25, 2021 (extended)
Penalties for Not Filing an EEO-1 Report
It is compulsory to file an EEO-1 Report – meaning that failure to do so will incur penalties. If an employer refuses or fails to complete an EEO-1 Report, the Equal Employment Opportunity Commission (EEOC) can obtain a U.S. District Court order that compels the employer to file a Report. This could potentially lead to the employer being held in contempt.
Federal contractors or subcontractors that need to file an EEO-1 Report may have their federal government contract terminated. They may also be prohibited from being granted future federal contracts.
Any employer that makes a willfully false statement on an EEO-1 Report can face a fine, imprisonment of up to five years, or both.
Illinois Requirements
Illinois law requires private businesses with 100 or more employees in the State of Illinois to submit an application to obtain an Equal Pay Registration Certificate (EPRC) by providing certain pay, demographic, and other data to the Illinois Department of Labor (IDOL) by March 24, 2024, and to recertify every two years after the first submission. The law also requires such employers to submit certain information with their application, including: a statement certifying that the business is in compliance with the Equal Pay Act of 2003 and other state and federal laws related to equal pay.
You can visit IDOL’s Equal Pay Registration Certificate page to access the online portal that businesses must use to submit their contact information and required data to IDOL, a training guide for use of the portal, a compliance statement template, and other certification information and resources.
If you have any questions regarding the Equal Pay Registration Certificate, you can email DOL.EPRC@illinois.gov.
Questions to the EEOC can be directed to 202.921.2539
Disclaimer: This blog is maintained by Lustig & Wickert, P.C. which produces it to provide general information about itself as well as general news about business law. The information you obtain at this site is not, nor is it intended to be, legal advice upon which you should rely or act. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website does not create an attorney-client relationship between Lustig & Wickert, P.C. and the user or browser. You should not send any confidential information to us until and unless a formal attorney-client relationship has been established. If you would like to discuss your concerns call us at 847.509.9090 or contact us by email at Info@Lustiglaw.com.
Read MoreWhy You Need A Business Lawyer
Starting a new business can be overwhelming and having the assistance of a business lawyer is crucial to your success. As an entrepreneur, there are a lot of things to consider when starting a business. Your business lawyer can advise you on things like the type of business entity you form and keeping accurate tax records. They can guide you through the complicated employment process and create strong contracts. They can also strongly support you through any conflicts or incidents that arise. Hiring the right business lawyer is important. It’s also helpful to develop a strong relationship with your attorney as your business grows as they can become one of your most valuable assets. Business lawyers are not one-size-fits-all. As with all important relationships, it’s important to make sure you’re both personally and professionally compatible. Take your time in finding the right legal representation for your specific business needs.
Consider your company’s needs.
Your company size and type can help guide you as you begin your search. You’ll want to find a business law firm that has the expertise you need now as well as in the future. A firm that has a diverse skill set is a good place to start. Finding a lawyer that has worked with businesses similar to yours can be beneficial. They will know the ins and outs of the types of contracts you will need and the issues that commonly arise. Knowledge of your industry helps them more effectively guide you in protecting your business.
Research attorneys and ask for referrals.
Researching lawyers can be mind-boggling. The sheer number of choices can be overwhelming. Online reviews are amazingly helpful. Look past the ratings and take the time to read the reviews. You may find that someone has had experiences with a specific lawyer that aligns with what you are looking for. Ask other business owners about their experiences with their attorneys. Referrals from others in your industry are especially helpful. Ask other business owners how their business lawyer resolved conflicts or tough situations. Knowing that a lawyer has been successful in representing other business owners is a good indicator that they can fulfill your needs as well.
Conduct an initial interview.
Make a shortlist of candidates and sit down with each one. Ask thoughtful questions and follow up on their responses. The conversation should leave you feeling confident in their abilities. Ask about their experience in your specific industry. Allow them to share why they think they would best represent your business. Explain what your goals are as a business owner and ask them how they can help you achieve them. Trust your instincts. It’s important that your lawyer is knowledgeable and experienced. It’s also important that you can communicate comfortably. Make sure whomever you choose to represent you is someone that you trust and have confidence in.
How a lawyer can assist your business
Your business lawyer can assist your business in a large number of ways. As you develop your relationship with them, they will learn the needs of your business. They will be able to make recommendations to improve areas of your company. It’s smart to get your business attorney involved early and often and to consider them an essential part of your team.
Launching your business
It’s best to use your business lawyer’s guidance and expertise even before your company gets off the ground. Creating your company with a strong legal foundation can protect you in the long run. This investment will likely save you money for years to come. Deciding on the type of business entity that you form is complicated. You’ll likely have to decide between a limited liability company (LLC), a sole proprietorship, a partnership or a corporation as the operating entity. Each of these has varying degrees of liability and tax implications. The number of factors in choosing which one to form makes for a complicated decision. Your business lawyer is well versed in the pros and cons of each type of business formation. Taking your specific company and your plans in mind, they can help you decide which type to establish. Making this early decision wisely can set your business up for long term success.
Creating and enforcing contracts
Strong, iron-clad contracts are the best way to protect you and your business. These legally binding documents are essential in various areas of running a company. Having a business lawyer who can expertly write and review these documents is a valuable asset. You may be launching your business with a family member or friend. Avoid an ugly situation down the road by getting the terms of your agreement in writing. Your attorney can create a contract to protect the interests of all parties involved.
When dealing with clients, it’s vital that there is an understanding of both what you will provide as a business and how you will be compensated. Depending on whether you are a service company or selling a product, your needs will vary. A business lawyer can create a contract that’s completely customized to your business needs.
Bringing on more consultants and contractors is a great sign that your business is growing. It’s important, however, to set clear expectations with a lawyer-drafted contract. This document will clearly outline the work that will be performed as well as the payment agreement. It will also create a timeline and protect you from liability and release of private information.
Navigating taxation
Complying with tax law is one of the most complicated parts of running a business. Your business lawyer’s expert advice can prevent future issues with taxation. They can also help you identify credits and deductions to potentially save you a ton of cash come tax season. Your business lawyer can guide you in developing a proactive record-keeping system to make prepping for tax filing simpler. They work with accountants on a regular basis and can recommend one to provide tax advice and help you meet all due dates and filing deadlines. Then, you can concentrate on running your business while your accountant ensures your tax compliance.
Protecting your property
It’s imperative to protect your business assets. Your intellectual property is as important, if not more, than your tangible property. A business lawyer can ensure that you’ve taken all of the necessary steps to protect both.
You may have sensitive proprietary information or trade secrets that you need to keep under wraps. Everything from product plans to client lists are valuable assets to your business. With a nondisclosure agreement, you can protect this information from an unfortunate breach. Your lawyer can create this agreement and advise you on when it should be used.
Unfortunate physical injuries can lead to costly lawsuits for your business. Protect yourself from losing your property or financial assets due to an unforeseen incident. A liability waiver can release you from being responsible for any injury that occurs to your employees or customers. Business lawyers have the expertise to guide you in creating this agreement if they feel it’s necessary for your specific line of business.
Employment agreements and issues
Employment law is constantly evolving. You can protect both your business and your employees by using an experienced business lawyer to guide you. From hiring to firing employees, legal guidance is essential in getting it done right.
Setting clear expectations for new employees sets the tone for a great working relationship. Your attorney can create an employment contract that outlines what is expected of them. It will also clearly state how they will be compensated and the benefits they will receive. Including confidentiality provisions, non-solicitation provisions, and terms of ending employment are also beneficial.
A well-written employee handbook can provide a reference guide for many employee issues and questions. Working with your business lawyer, you can create a handbook to outline your practices and policies. Everything from dress codes to paid time-off can be included. Having an open line of communication with your business lawyer makes updating these policies quick and easy.
Termination is a touchy subject. Many times, employment agreements don’t end amicably. Your lawyer can help protect you from disgruntled past employees.
Non-compete agreements and non-solicitation agreements can prevent former employees from using your confidential business information against you. It will also restrict them from going to work for a competitor and taking their customer relationships with them.
It’s helpful to keep records on the terms of any terminations or employee conflicts. Share these with your lawyer and keep them updated on any potential problems. It’s also helpful to consult with your attorney prior to terminating an employee. This will make it easier for them to represent you should any past employees accuse you of unlawful termination.
Bankruptcy guidance
Unfortunately, sharp downturns in the economy or unforeseen circumstances happen. They can put your business in a situation that you simply can’t recover from. However, this doesn’t have to mean the end of the road for your company. Your attorney can guide you through the bankruptcy process so your business can recover and even flourish.
Hard times can be overwhelming. Fortunately, your business lawyer is an expert at navigating them. They will help you decide on the right course of action to steer your ship through these troubled waters. Bankruptcy seems like a rash action, but it might just be what you need to save your company.
Filing for Chapter 11 bankruptcy can help you reorganize your business. With the guidance of your lawyer, you can develop a plan to make things right with your creditors. You may even be able to discharge a portion of the debt you owe. Your lawyer will present the plan to the bankruptcy court and with their approval, you’ll be on the road to financial recovery.
Court representation
The day may arise that your business needs to head to court. Your business lawyer will be by your side, fighting for your company and its interests. They will advise you to make the best decisions and work towards the best possible outcome.
Unfortunately, some conflicts can’t be resolved without legal action. As a business owner, it’s important to keep your lawyer updated on any trouble you see brewing. This will allow them to best guide you and handle your case should it end up in front of a judge.
Heading into the courtroom can be terrifying. Your lawyer will be with you every step of the way to help guide you through the legal process. They can also help you propose a settlement if necessary to remediate the situation at a lower cost.
Day-to-day advising
Your relationship with your business lawyer will be one of your most valuable additions to your team. Not only can they help guide you through the big moments of running your business, but they can also be there to support day-to-day operations.
Making decisions is a tough task for a business owner. Having a knowledgeable expert on your team can help. Bouncing ideas off your lawyer can help you reach the smartest conclusion. Sometimes, having your attorney present at meetings can be proactive. They can offer immediate advice and provide guidance through everything from transactions to terminations.
Your business lawyer can be a trusted advisor and voracious representative. Developing and fostering your relationship with them can provide you with useful resources. As part of your team, your business lawyer can help your business grow and prosper well into the future.
