3 Key Takeaways:

1. Mandatory BOI Reporting for E-commerce Businesses: E-commerce businesses structured as LLCs, corporations, or similar entities must file Beneficial Ownership Information (BOI) reports under the Corporate Transparency Act (CTA). This requirement applies unless the business qualifies for specific exemptions, such as being a large operating company.
2. Exemptions for Large Operating Companies: Only businesses meeting certain criteria—such as having over 20 full-time U.S. employees, operating from a physical U.S. office, and earning over $5 million in gross receipts—are exempt from BOI reporting. Most small to medium-sized e-commerce businesses do not qualify for this exemption and must comply.
3. Importance of Accurate and Timely Reporting: E-commerce businesses need to report information about beneficial owners and control persons. Changes to this information must be reported within 30 days, emphasizing the need for accurate record-keeping and timely updates to avoid penalties.

As an e-commerce business owner, you’re used to navigating the ever-changing landscape of online retail. Now, there’s a new requirement on the horizon that you need to be aware of Beneficial Ownership Information (BOI) reporting. This blog post will guide you through the essentials of BOI reporting for e-commerce businesses and highlight some unique aspects that online retailers should consider.

What is Beneficial Ownership Reporting?

Beneficial Ownership Information reporting is a new requirement under the Corporate Transparency Act (CTA), which came into effect on January 1, 2024. The goal is to combat money laundering, tax fraud, and other financial crimes by increasing transparency in company ownership structures.

Does My E-commerce Business Need to File a BOI Report?

If your e-commerce business is structured as an LLC, corporation, or any other entity created by filing with a secretary of state or similar office, you’ll likely need to file a BOI report. This applies to both domestic and foreign entities registered to do business in the U.S.However, there are some exemptions. For instance, if your e-commerce business:

• Has more than 20 full-time employees in the U.S.
• Operates from a physical office in the U.S.
• Filed a federal tax return showing more than $5 million in gross receipts or sales

Then you may qualify for the “large operating company” exemption. But let’s face it, most e-commerce startups and small businesses won’t meet these criteria.

Unique Aspects of BOI Reporting for E-commerce Businesses

1. Digital-First Operations: Many e-commerce businesses operate entirely online without a physical storefront. This doesn’t exempt you from reporting, but it might affect how you report your principal place of business.
2. Rapid Growth: E-commerce businesses can scale quickly. If you start small but grow to meet the exemption criteria, you’ll need to keep track of when you qualify to stop reporting.
3. International Ownership: E-commerce often attracts international entrepreneurs. If you’re a foreign national running a U.S.-based e-commerce entity, you’ll need to report your information as a beneficial owner.
4. Dropshipping and Fulfillment Partners: Your business structure might involve multiple parties. Remember, you’re reporting on who owns and controls the business, not necessarily who handles the products.
5. Multiple Sales Channels: If you’ve set up separate LLCs for different online marketplaces or websites, you may need to file multiple BOI reports.

What Information Do E-commerce Businesses Need to Report?

You’ll need to provide:

1. Company information:
   • Legal name
   • Any trade names or DBAs
   • Address of the principal place of business
   • State of formation
   • Taxpayer Identification Number
2. Information about each beneficial owner:
   • Full legal name
   • Date of birth
   • Residential address
   • Unique identifying number (e.g., passport or driver’s license number)
   • An image of the identifying document

For e-commerce businesses formed after January 1, 2024, you’ll also need to provide similar information for the company applicant(s) – the person(s) who filed the formation documents.

Exemption for Large Operating Companies

One notable aspect of the Beneficial Ownership Information (BOI) reporting requirements is the exemption for large operating companies. This exemption means that major corporations like Amazon and Walmart are not required to file a BOI report. However, most e-commerce businesses that do not meet the criteria for this exemption will need to comply with the reporting requirements.

To qualify for the large operating company exemption, a business must meet all of the following criteria:

1. Employee Count: The company must have more than 20 full-time employees in the United States.
2. Physical Presence: The company must operate from a physical office within the United States.
3. Revenue Threshold: The company must have filed a federal tax return in the previous year showing more than $5 million in gross receipts or sales from U.S. sources.

These criteria are designed to exclude large, well-established companies that are already subject to significant regulatory oversight from the BOI reporting requirements. For instance, companies like Amazon and Walmart, which have extensive operations, numerous employees, and substantial revenues, fall under this exemption due to their size and the existing transparency in their operations.

Why Most E-commerce Businesses Need to File a BOI Report

While the exemption for large operating companies provides relief for major corporations, most e-commerce businesses will not meet these stringent criteria. The majority of e-commerce businesses are small to medium-sized enterprises that operate with fewer employees, may not have a physical office, and often do not reach the $5 million revenue threshold.

For these smaller e-commerce businesses, the BOI reporting requirements are mandatory. This means that if you own an e-commerce business structured as an LLC, corporation, or other entity, and you do not qualify for the large operating company exemption, you will need to file a BOI report with FinCEN. This report will include detailed information about your beneficial owners, such as their full legal names, dates of birth, residential addresses, and unique identifying numbers from government-issued documents.

When Do E-commerce Businesses Need to File?

• If your e-commerce business was formed before January 1, 2024, you have until January 1, 2025, to file your initial report.
• For businesses formed on or after January 1, 2024, you must file within 90 days of formation or registration.
• After the initial filing, you’ll need to report any changes to the information within 30 days of the change occurring.

Tips for E-commerce Business Owners

1. Use a FinCEN Identifier: If you own multiple e-commerce entities, consider obtaining a FinCEN Identifier. This unique number can be used in lieu of providing your personal information for each entity you own.
2. Stay Organized: Keep detailed records of your business structure, ownership, and any changes. This will make reporting and updates much easier.
3. Set Reminders: With the fast-paced nature of e-commerce, it’s easy to forget about reporting requirements. Set up reminders for initial filing and potential updates.
4. Consider Privacy: While the reported information isn’t public, consider how you structure your business if privacy is a concern. For instance, using a registered agent’s address instead of your home address.

Beneficial Ownership Information Reporting for E-Commerce Businesses: A Few Final Thoughts

Understanding and complying with the BOI reporting requirements is crucial for your e-commerce business. Staying organized and ensuring accurate filings can prevent penalties and keep your operations running smoothly. Now that you’ve learned about the essentials, it’s time to take action.

You’re just a step away from securing your compliance. Click here to begin filling out the form and securely submit your BOI report today!