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. As the year draws to a close, an important deadline looms for businesses registered prior to 2024.
Let’s dive into who must file BOI reports, what information is essential, and the deadlines you can’t afford to miss.
Key Takeaways:
- Most U.S. business entities—including LLCs, S-corps, and trusts—must file BOI reports with FinCEN.
- These reports contain basic information about the entity and the beneficial owner(s). Each beneficial owner must file their own BOI report.
- Foreign companies doing business in the United States may need to file BOI reports, as well.
- If you registered your business before January 1, 2024, your first deadline is fast approaching! These businesses must file a BOI report by January 1, 2025.
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.
When Are BOI Reports Due?
Timing is crucial when it comes to BOI reporting. As 2024 draws to a close, important deadlines are approaching for many businesses. Pay close attention to these deadlines and be sure to file on time to avoid penalties.
- 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.
- 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 in 2025 and beyond: Entities created on or after January 1, 2025, will have 30 days after registration to file a BOI report.
Who Needs to File BOI Reports?
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.
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.
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 below.
- Trusts: Generally required to report unless they meet the criteria for exemptions mentioned below.
Who Is Considered a Beneficial Owner?
- 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.
- 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.
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.
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.
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.
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.
Do I Need a Lawyer to File My BOI Report?
No, you don’t need a lawyer to file your BOI report with FinCEN. For many small businesses, the report is straightforward. However, there are some situations where you can benefit from professional help:
- You have ownership or control of several businesses: While a single BOI report is usually simple, you may not have time to file several of these reports by January 1, 2025. With professional filing services, you can check BOI reporting off your to-do list in one fell swoop.
- You have complex business structures: If you have complex business structures (which may include holding companies, offshore companies, and trusts), this complicates your BOI reporting requirements. By hiring an attorney to complete your BOI filings, you can ensure you don’t miss any details.
- You’re not good with deadlines: Did you know you can rack up fines of $591 for each day your BOI report is late? If you’re not good with deadlines and want to avoid these expensive penalties, professional BOI filing can provide much-needed peace of mind.
- You don’t want to take any risks: Even if your situation is on the simple side (such as a single-owner LLC), many people would rather hire a professional than handle such legal details themselves. If you have a lot on your plate and would prefer not to worry about BOI reporting at all, consider hiring a professional to check it off your list and ensure accuracy.
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 $591 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 toward greater corporate transparency in the United States. While the BOI report is straightforward for most businesses, those with multiple business ventures or complex ownership structures may wish to hire an attorney for peace of mind.
