Government Arcana

Does the acronym BOIR mean anything to you? Unless you are either a business owner or someone who services businesses, such as an accountant or attorney, you don't.

How about FinCEN? Odds are slightly greater, I surmise, but still not great.

I won't leave you in the dark any longer. FinCEN stands for Financial Crimes Enforcement Network, a government agency in the Treasury Department whose purpose and purview are self-explanatory. BOIR stands for Beneficial Ownership Information Report, a new bit of data collection intended to identify the individuals who are the ultimate owners of business entities. As in, they want to drill through layers of shell companies, stacked LLCs, and so forth, to get the names of the humans who might be hiding behind them for nefarious purpose. With all the rest of us swept up along the way.

Whether this constitutes an unacceptable invasion of privacy is a topic I will leave for another day. What's interesting to me is how this new requirement (instituted this year, reports due by the end of the year) spawned a cottage industry. Since the nature of what I do involves ownership of such entities, I'm impacted by the BOIR requirement, and I've heard from several firms (legal, accounting, etc.) with which I work that they offer BOIR filing services.

For a fee, of course. The Internet points at many firms offering this service for, roughly on average, $150ish per entity.

Not a huge number, but not trivial, either. So, I looked into what's involved. To the government's credit, the instructions and filing template were pretty well constructed, so I dove in. Including finding and reading the instructions, the learning curve, some distractions, and a total lack of urgency, the first one took me well under than thirty minutes. Each subsequent one less than five.

Nevertheless, I expect that most small business owners will farm this out rather than figure it out. Some of that might be time constraints, but I doubt many would eschew the equivalent of three hundred bucks an hour. Rather, I suspect that most won't even give thought to figuring it out themselves because they are so used to requiring expert services when dealing with the government. Accountants, attorneys, expediters, and the like live off the complexity and frequent inscrutability of government reporting and compliance.

Google reports that there are approximately 21.6 million LLCs in the US. While many of these won't have to file BOIRS, it's safe to conclude that tens of millions of dollars in fees, and possibly much more, will be paid to comply with this reporting requirement.

This is all dead money. It creates no wealth, it produces no productivity improvement, it does not benefit the economy any more than welfare handouts do. Whatever is paid to the service providers is lost to those paying. In terms of economic activity, it's a wash. In terms of economic efficiency, it's a drain. Investable cash leaves a business's accounts, and time that could be used productively is instead eaten up by the government.

But, that too is a topic for another day.

What struck me about all this was the instinct to hand off what turned out to be a simple exercise to 'experts.' The emergence of a plethora of filing services in addition to the notices and solicitations from law firms affirms this instinct is not unusual. It's a damning commentary on the size and complexity of our government, and a telltale the shift from "government of by and for the people" to one that consists of a priest class imposing arcana and special revelation upon an unknowing laity.