BOI (Beneficial Ownership Information) reporting requirements have kicked into gear, marking a significant shift in how businesses must disclose ownership details. This change affects a wide range of entities, from small startups to large corporations.

Let’s dive into who must report, what information is essential, and the deadlines you can’t afford to miss.

Understanding BOI Reporting Requirements

The Corporate Transparency Act (CTA) mandates that certain business entities disclose information about the individuals who beneficially own or control them.

This initiative, spearheaded by the Financial Crimes Enforcement Network (FinCEN), aims to prevent illegal activities such as money laundering, financing of terrorism, and other illicit financial schemes by shedding light on the true ownership of businesses.

Who Needs to File BOI Reports?

The BOI reporting requirements under the Corporate Transparency Act introduce a new compliance landscape for businesses in the United States. It can be difficult to understand whether you and your business fall under these requirements.

Below is an overview, but we recommend consulting a business attorney about your specific situation. Feel free to reach out if you have any questions.

BOI Reporting Requirements Overview

Most entities registered to do business in the U.S. are now required to report beneficial ownership information to FinCEN. This includes information on individuals who own, control, or significantly influence the company’s operations.

However, there are notable exemptions aimed at preventing redundancy and focusing on entities where transparency is most needed.

Exempt Entities

Certain entities are exempt from these reporting requirements, including:

• Publicly traded companies, due to their existing regulatory reporting obligations.
• Government entities.
• Companies that operate under extensive regulatory oversight, such as banks, credit unions, insurance companies, securities brokers, and investment advisors.
• “Large operating companies” that meet specific criteria, including having more than 20 full-time employees in the U.S., reporting more than $5 million in gross receipts or sales on tax returns, and maintaining an operating presence at a physical office within the U.S.

Specific Entity Types

• Sole Proprietorships and General Partnerships: Typically exempt, as they do not require registration with a state office.
• LLCs, S-corps, and C-corps: Generally required to report unless they meet the criteria for exemptions mentioned above.
• Trusts: Generally required to report unless they meet the criteria for exemptions mentioned above.

Foreign Entities Operating in the U.S.

Foreign entities that are registered to do business in the United States may also be subject to the BOI reporting requirements. If a foreign entity qualifies as a “reporting company” by actively engaging in commerce or maintaining a physical presence in the U.S., it must disclose its beneficial ownership information to FinCEN.

Key Considerations for Foreign Entities:

• Qualification: A foreign entity is considered subject to BOI reporting if it is registered to do business in any U.S. state or territory.
• Reporting Requirements: Similar to domestic entities, foreign entities must provide detailed information about their beneficial owners. This includes identifying individuals who directly or indirectly own a significant percentage of the entity or have substantial control over it.
• Exemptions: Certain foreign entities may be exempt from reporting requirements if they fall under the same exemption criteria as domestic entities, such as being publicly traded in their home country or meeting specific operational and size thresholds. It’s crucial for foreign entities to assess their status and understand their reporting obligations to ensure compliance with the CTA and avoid penalties.

Beneficial Owners

A beneficial owner is defined as any individual who, directly or indirectly, exercises substantial control over an entity or owns or controls a significant percentage of that entity (usually 25% or more).

This definition aims to uncover the individuals who have the ultimate say in the actions of a company, even if they are not listed in its official documentation. Each beneficial owner must file their own BOI report.

Company Applicants

For businesses registered after January 1, 2024, the BOI reporting requirements also extend to “company applicants.” These are the individuals who directly file the application to create or register the entity.

What Information Must Be Reported?

The BOI reporting process requires detailed information from entities and their beneficial owners:

• Entities must disclose: Legal name, trade name (if applicable), business address, Tax Identification Number (TIN), and the names and details of beneficial owners.
• Beneficial owners and company applicants must provide: Legal name, date of birth, address, and an identification number from an accepted document (e.g., passport, driver’s license).

This detailed information contributes to a transparent registry maintained by the Financial Crimes Enforcement Network (FinCEN), aimed at preventing and combating financial crimes.

See the full instructions on FinCEN’s website.

When Are BOI Reports Due?

Timing is crucial when it comes to BOI reporting. Pay close attention to these deadlines and be sure to file on time to avoid penalties.

• New registrations in 2024: For entities created or registered to do business between January 1 and December 31, 2024, you must file your BOI report within 90 days of registration.
• New registrations after 2024: Entities created on or after January 1, 2025, will have 30 days after registration to file a BOI report.
• Existing companies: Existing entities formed prior to 2024 have a grace period until January 1, 2025, to get their reports in order. Staying ahead of these deadlines ensures your business remains in good standing and avoids potential penalties.
• Updates to information: Any changes to beneficial ownership information should be reported within 30 days of the change.
• Corrections: If you accidentally submitted incorrect information, corrections should be reported within 14 days of realizing the error.

How to Submit Your BOI Report

• Create a FinCEN account: First, create an account on FinCEN’s BOI reporting portal.
• Gather information and prepare report: Gather all the required information before you begin. You can upload a PDF or fill out the BOI report directly in the FinCEN portal.
• Submit report: Reports must be filed electronically through FinCEN’s reporting portal.
• Download transcript: If you filled out the report online, be sure to download and retain your BOIR transcript.
• Update as necessary: If any changes occur to the beneficial ownership information, reporting companies are required to update their reports. This ensures that the information held by FinCEN remains current and accurate.

Penalties for Non-Compliance

Failure to comply with the BOI reporting requirements can lead to significant consequences. The CTA imposes strict penalties on entities and individuals who either fail to report the required information or knowingly provide false or incomplete information.

• Financial Penalties: Entities and individuals found in violation of the reporting requirements may face civil penalties up to $500 per day for ongoing non-compliance.
• Criminal Penalties: Willful failure to provide accurate and complete BOI information, or intentionally reporting false information, can result in criminal penalties. These can include additional fines of up to $10,000 and/or imprisonment for up to 2 years.

Need Help with BOI Reporting Requirements?

The implementation of these new BOI reporting requirements marks a significant step towards greater corporate transparency in the United States, but it can be confusing for small business owners.

While the process may seem daunting, preparation and organization can streamline your compliance efforts.