Business Law Questions

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Whyit matters: Why does your product or service exist, and is it working? This is a fundamental question for every business owner, no matter what industry they are in. Being clear on your 'why' is an important element in building a brand.

How to answer this: Nail down your 'why' before you even start. Practice explaining your business idea to people you trust, like advisors, mentors, family, and friends.

When your business is already rolling, ask your customers directly why they choose your brand. Doing so not only gives you valuable feedback, but can also help improve customer relations. Customers want to be heard, and this can help you form a long-lasting brand community.

A business needs to generate income in order to buy inventory, finance growth, become self-sustainable, and be profitable long-term. Without consistent income, a business can become insolvent and eventually fail.

Why it matters: When is the last time you considered adjusting prices? It can be tempting to keep the same prices, especially if things are going well, but market shifts often require adjustments to your pricing strategy.

How to answer this: Analyze your profit and loss statement. Factor in how the costs of materials and labor have changed over time. Research inflation-related market shifts and how competitors may have adjusted their pricing as a result.

Why it matters: If previous customers leave as you attract new ones, you are not building a stable company. Aim to increase both new and repeat customers. Losing customers can be a sign of major issues such as poor customer service or a disappointing product. That's why customer feedback is so important.

Why it matters: Marketing is expensive. Referrals from existing customers is a cost-effective alternative that requires minimal financial investment. If you choose to invest a little more, referral programs can also be a great way to reward and incentivize loyal customers to make referrals and boost customer relationships.

How to answer this: Ask your customers for referrals, either directly or through anonymous surveys. Make sure to encourage follows, engagement, and shares on social media as well. Ensure you have a way to keep track of all customers acquired through referrals.

How to answer this: Review your gross profit by customer, and ask your employees to help evaluate which customers require the most resources. Keep in mind that helping customers is a key part of running a business, but it shouldn't overburden how the business operates. Calculate KPIs such as customer lifetime value, or the amount of profit you can expect to generate from a customer over the time they are a customer. This will help you get a sense of the most profitable customers.

Social media can be a great way to reach customers where they spend their time. A strong social media strategy with engaging content can help build brand awareness, generate leads, and grow your audience.

How to answer this: An effective strategy looks at more than vanity metrics such as 'likes.' Engagement is the key. Use social listening tools to determine what's driving engagement and website traffic.

FinCEN has prepared the following Frequently Asked Questions (FAQs) in response to inquiries received relating to the Beneficial Ownership Information Reporting Rule and Beneficial Ownership Information Access and Safeguards Rule.

FinCEN published the rule that will govern access to and protection of beneficial ownership information on December 22, 2023. Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities in using the reported information only for authorized purposes and handling in a way that protects its security and confidentiality.

FinCEN is engaged in a robust outreach and education campaign to raise awareness of and help reporting companies understand the new reporting requirements. That campaign involves virtual and in-person outreach events and comprehensive guidance in a variety of formats and languages, including multimedia content and the Small Entity Compliance Guide, as well as new channels of communication, including social media platforms. FinCEN is also engaging with governmental offices at the federal and state levels, small business and trade associations, and interest groups.

FinCEN will continue to provide guidance, information, and updates related to the BOI reporting requirements on its BOI webpage, www.fincen.gov/boi. Subscribe here to receive updates via email from FinCEN about BOI reporting obligations.

No. FinCEN expects that many, if not most, reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers such as lawyers or accountants.

Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

It depends. A domestic entity such as a statutory trust, business trust, or foundation is a reporting company only if it was created by the filing of a document with a secretary of state or similar office. Likewise, a foreign entity is a reporting company only if it filed a document with a secretary of state or a similar office to register to do business in the United States.

Entities should also consider if any exemptions to the reporting requirements apply to them. For example, a foundation may not be required to report beneficial ownership information to FinCEN if the foundation qualifies for the tax-exempt entity exemption.

No, unless a sole proprietorship was created (or, if a foreign sole proprietorship, registered to do business) in the United States by filing a document with a secretary of state or similar office. An entity is a reporting company only if it was created (or, if a foreign company, registered to do business) in the United States by filing such a document. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company.

It depends. Homeowners associations (HOAs) can take different forms. As with any entity, if an HOA was not created by the filing of a document with a secretary of state or similar office, then it is not a domestic reporting company. An incorporated HOA or other HOA that was created by such a filing also may qualify for an exemption from the reporting requirements. For example, HOAs recognized by the IRS as section 501(c)(4) social welfare organizations (or that claim such status and meet the requirements) may qualify for the tax-exempt entity exemption. An incorporated HOA that is not a section 501(c)(4) organization, however, may fall within the reporting company definition and therefore be required to report BOI to FinCEN.

Yes, if the entity meets the reporting company definition and does not qualify for any exemptions to the reporting requirements. See Question C.1 for more information on what entities are reporting companies.

A company is not required to report its beneficial ownership information to FinCEN if it ceased to exist as a legal entity before January 1, 2024, meaning that it entirely completed the process of formally and irrevocably dissolving. A company that ceased to exist as a legal entity before the beneficial ownership information reporting requirements became effective January 1, 2024, was never subject to the reporting requirements and thus is not required to report its beneficial ownership information to FinCEN.

Although state or Tribal law may vary, a company typically completes the process of formally and irrevocably dissolving by, for example, filing dissolution paperwork with its jurisdiction of creation or registration, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business, and winding up its affairs (e.g., fully liquidating itself and closing all bank accounts).

If a reporting company (see Question C.1) continued to exist as a legal entity for any period of time on or after January 1, 2024 (i.e., did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024), then it is required to report its beneficial ownership information to FinCEN, even if the company had wound up its affairs and ceased conducting business before January 1, 2024.

An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.

There are five instances in which an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception. In those cases, the reporting company does not have to report that individual as a beneficial owner to FinCEN.

The unaffiliated company itself cannot be a beneficial owner of the reporting company because a beneficial owner must be an individual. Any individuals that exercise substantial control over the reporting company through the unaffiliated company must be reported as beneficial owners of the reporting company. However, individuals who do not direct, determine, or have substantial influence over important decisions made by the reporting company, and do not otherwise exercise substantial control, may not be beneficial owners of the reporting company.

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