Starting in 2024, a lot of small businesses are being required to file a beneficial ownership information report to the Financial Crimes Enforcement Network (FinCEN).
But what is a beneficial ownership information report, and which businesses need to file one? If you aren’t familiar with this report, don’t worry; in this guide, we’ll cover the essential facts you need to know to successfully file the beneficial ownership information report.
What is a beneficial ownership information (BOI) report?
In 2019, Congress introduced (and later passed) the Corporate Transparency Act, designed to prevent money laundering and terrorism funding through American business structures. The act is designed to promote transparency regarding the owners and leaders of a business, ideally helping prevent companies from using shell corporations to hide any financially nefarious dealings.
Under the terms of the act, beginning in 2024, certain business entities — namely limited liability companies, corporations, and any other entities that are created by filing a registration form with a secretary of state or any similar U.S. office — must file a beneficial ownership information report to FinCEN, the Financial Crimes Enforcement Network.
The BOI report provides information about a business’s “beneficial owners.” A beneficial owner is a person who meets any of the following criteria:
- They have substantial control over the corporation or LLC
- They hold 25% or more of the entity’s ownership interest
- Economically, they benefit substantially from the entity’s assets
By requiring this information, FinCEN gains clear information about who owns and operates a company.
When are beneficial ownership reports due?
The Corporate Transparency Act laid out clear due dates for reporting companies to submit their beneficial ownership information. The deadline to file your BOI report depends on when your business was officially formed. The table below shows how long you have to file this form based on the formation date.
|Business Formation Date
|BOI Report Deadline
|Prior to Jan. 1, 2024
|1 year (by Jan. 1, 2025)
|On/After Jan. 1, 2025
Business entities created prior to January 1, 2024, need to file their BOI report by January 1, 2025. Reporting companies created after January 1, 2024, need to file within 90 days of their business’s creation (specifically within 90 days of getting approved by their state agency). Meanwhile, a reporting company created after January 1, 2025, would have to file their BOI within 30 days of receiving actual or public notice that their business has been approved.
These due dates also apply to a qualifying foreign reporting company.
If your state requires you to file an initial report after creating your business, we recommend reporting beneficial ownership information at the same time and knocking out both tasks at once. If not, it’s best to file your beneficial owner report as soon as your business is approved to ensure the task doesn’t get lost in the shuffle.
What about company applicants?
“Company applicants” are the people who were primarily responsible for the creating of a business entity. Under the Corporate Transparency Act, there are technically two types of company applicants.
The first type of company applicant is someone who personally filed the business’s formation documents. The other type is an individual who directed the process of filing the formation documents but didn’t file the forms personally.
You aren’t always required to report company applicant information. A domestic reporting company or foreign reporting company created before January 1, 2024, isn’t required to include their company applicant information on their beneficial ownership report. All new business entities will need to list at least one (but not more than two) company applicant.
What happens if I don’t file a beneficial ownership report?
Forgetting to file (or simply choosing not to file) a BOI can have severe consequences, including civil penalties and criminal penalties. In short, willfully neglecting to file a report is regarded as a crime under the Corporate Transparency Act.
For civil penalties, you could face fines of $500 per day the report isn’t filed. If you incur criminal penalties, you might be fined up to $10,000, imprisoned for up to three years, or both. The senior officers of the business can also be held personally responsible for the failure.
As a result, it’s absolutely essential to file your BOI on time.
Determine if you need to file a beneficial ownership report
While many limited liability companies and corporations will need to report beneficial ownership information, not all of them qualify as reporting companies. Here are a few businesses that are exempt from being reporting companies and filing a BOI:
- Entities that are already registered under the Commercial Exchange Act or another Exchange Act
- Public utilities
- Governmental authorities
- Insurance companies and state-licensed insurance producers
- Pooled investment vehicles
- Businesses related to securities: a security reporting issuer, a securities exchange or clearing agency, broker or dealer in securities
- Financial institutions: banks, credit unions, money services businesses, accounting firms, investment companies or investment advisers, venture capital fund advisers, and financial market utilities
- Organizations with tax exempt status OR an organization assisting a tax-exempt entity
- Entities that meet criteria for being considered “inactive” (formed before January 1, 2020, not actively doing business, has no foreign owners, hasn’t had any changes in ownership in the last 12 months, and hasn’t sent or received funds exceeding $1,000 in the last 12 months)
- Entities that meet the subsidiary exemption requirement, meaning it is owned or controlled by an exempt entity
- Large operating companies: entities that have more than 20 employees, more than $5,000,000 in gross receipts, and a physical office in the U.S.
Generally speaking, businesses that are exempt from the BOI requirement either exist for nonprofit purposes or have already registered their ownership information for another reason. For example, large, publicly traded companies don’t file a BOI because they’ve already completed registration with the U.S. Securities and Exchange Commission.
If your LLC or corporation doesn’t meet one of the criteria listed above, then you probably need to file a BOI. Certain partnerships might also need to. As a general rule, if you file formal formation paperwork with your state (and you don’t qualify for an exemption), then you should file a BOI with FinCEN.
What’s the difference between a domestic reporting company and a foreign reporting company?
Both domestic reporting companies and foreign reporting companies are required to report beneficial ownership information. But what’s the difference between the two?
Reporting companies created under the laws of a state or territory in the United States are considered domestic. But if a company is organized in a foreign country, and it’s filed paperwork to be able to transact business in the U.S., it’s regarded as a foreign reporting company.
How to Report Beneficial Ownership Information
When the time comes to file a BOI application, it’s essential to file it properly. Let’s talk through the steps you’ll need to follow.
Gather ownership information for your beneficial owners
When you report beneficial ownership information, you’ll be asked to provide the following information for each beneficial owner:
- Their full legal name
- Their current residential or business address
- An acceptable identification document like a personal identification card or driver’s license OR an ID number from a valid foreign passport with the individual’s photo and date of birth
For a full checklist of the information you need to provide about each beneficial owner, check out FinCEN’s Small Entity Compliance Guide.
Who are your beneficial owners?
Before you can dive into beneficial ownership information reporting, you need to double-check who your beneficial owners are. As we mentioned earlier, the typical beneficial owner is someone who exerts control over or substantially owns the company (or both). But there are some people who might be exempt owners even though they meet those criteria. Here are a few of them:
- A beneficial owner who is a minor
- A person who’s acting as an agent or representative for another person
- An employee whose economic benefit comes only from their employment in the business
- A creditor of the business
- Any individual who has a stake in the business by inheritance alone
Those beneficial owners are exempt from the BOI report. All others need to be included in the paperwork.
File your initial BOI report online with the Financial Crimes Enforcement Network
The Financial Crimes Enforcement Network’s website offers a helpful e-filing platform where you can submit your BOI report. The portal will walk you through the process, prompting you to provide information for each beneficial owner, your business name, your trade names, your business address, your EIN, and so on.
As you go, type in all the requested information about your business; be very careful to input the correct information so you don’t have to make any corrections later on. The Department of Treasury does provide a way to correct mistakes, but it’s a hassle. Avoiding those mistakes from the get-go is easier.
FinCEN does not charge a filing fee for initial BOI reports.
Create a FinCEN Identifier (Optional)
On the Financial Crimes Enforcement Network’s website, you’ll be offered a chance to sign up for a FinCEN identifier, or a FinCEN ID. This number is especially helpful for individuals or reporting companies that want to simplify their reporting process. If you have a FinCEN identifier, you can list that number on your beneficial ownership report instead of your name, address, and other information.
To apply for a FinCEN identifier, you’ll need to provide the following information:
- Your legal name
- Your current address
- An ID number from an acceptable government identifying document like a driver’s license or passport
- An image of your identifying document
While you don’t have to get a FinCEN identifier, it can make it easier to report beneficial ownership information later on.
Keep a transcript
It’s best practice to keep a copy of the information you list on the beneficial ownership report. It’s much like keeping a record of your tax filings; since it’s a federal filing, you’ll want to keep documentation of it. Plus, having a copy on hand is helpful if you ever need to reference the information.
Keep your beneficial ownership report information updated
It’s not uncommon for a reporting entity to need to update their BOI information somewhere down the line. Here are some of the reasons you might need to update your BOI:
- The beneficial owners have changed in a way that meets the 25% ownership threshold
- The business’s legal name changed or a new DBA (doing business as) name was acquired
- A beneficial owner’s name, address, or unique identifier changed
- A minor owner reaches adulthood
In general, you have 30 days to file an updated BOI report when any of the above information changes.
What if I find a mistake in my BOI information?
If you discover that you accidentally listed faulty information on your report — for example, you accidentally wrote 1981 instead of 1982 for an owner’s birth date — you’ll need to correct it. FinCEN requires you to file this update within 30 days of discovering the error. Failing to update this information can have hefty penalties.
Like the initial beneficial ownership report, your corrected report has no filing fee.
What happens if my business dissolves or closes down?
There’s an important distinction to make here: whether you’ve dissolved your business or simply halted operations. If you dissolve your LLC or corporation, your company ceases to exist; it can’t be required to adhere to the Corporate Transparency Act.
But let’s say that you just stop selling products and transacting business without formally dissolving your business entity. If that’s the case, you’d still be considered a reporting company responsible for filing beneficial ownership information to FinCEN. You could still be penalized not for meeting reporting requirements.
Because of this (and other potential consequences), it’s highly recommended for legal entities to formally file dissolution paperwork when they intend to close down.
Still feeling anxious about filing your beneficial ownership information report? We can help. Our ZenBusiness Beneficial Ownership Filing service can help you comply with the Corporate Transparency Act. We can also help you start and maintain your business. Whether you need help starting an LLC or corporation, a platform to manage your finances, or peace of mind that your business is compliant, we can help. Let us handle the red tape side of things so you can focus on growing your business.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.