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The Basics
Beneficial Ownership Information (BOI)
File to avoid $10,000 penalty
Entity
type
LLC, INC
No. of
Owners:
1+
Filing
Deadline:
3 mo
Non filing
Penalty:
$10k
BOI Filing Package
A Complete Tax Filing Package for Your Beneficial Ownership Information (BOI)
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FinCen BOI
BOI Report
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CPA Review
FinCen E-File
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BOI Filing Receipt
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Audit Protection
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BOI Reporting
What is Beneficial Ownership Information (BOI) Reporting?
Starting January 1, 2024 the U.S. treasury department has a new reporting requirement for any U.S. corporation or LLC: Beneficial Ownership Information (BOI) Reporting.
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The Law:
The Corporate Transparency Act (CTA) created new reporting requirements for companies created or registered to do business in the United States. Effective January 1, 2024, reporting companies will be required to provide information regarding the company and its beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Failure to comply with the new requirements will result in fines and potentially criminal charges.
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Who must file?
Under the CTA, any foreign or domestic company that is considered a reporting company is required to provide company information and beneficial ownership information. A reporting company is broadly defined as any corporation, limited liability company, or similar entity that is created or registered to do business in the United States by filing documents with a secretary of state or a similar office of a U.S. state or tribal government.
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Who Is a Beneficial Owner?
A beneficial owner is an individual who exercises “substantial control” over the reporting company, either directly or indirectly, or who owns or controls 25% or more of the reporting company’s ownership interests.
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What to report?
Reporting companies must provide the following information about the company:
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The full legal name of the company;
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Any other trade names used by the company;
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The street address of the company’s principal place of business (a P.O. box number or third-party address will not be accepted);
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A foreign company that does not have a principal place of business must report the address the company uses to conduct its business in the United States
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The jurisdiction in which the company was formed or registered; and
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An IRS issued Taxpayer Identification Number (TIN).
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Foreign reporting companies without a TIN must report a tax identification number issued by a foreign jurisdiction and identify the issuing jurisdiction.
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Beneficial Owner Information
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Reporting companies must provide the following information about their beneficial owners:
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Full legal name;
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Date of birth;
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Current residential or business street address;
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A unique identifying number from a non-expired, government-issued photo ID, such as a U.S. passport or state driver’s license (a foreign passport will be accepted if no U.S. issued ID is available); and
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An image of the government-issued photo ID from which the number was provided.
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Company Applicant Information
A reporting company that was created on or after January 1, 2024, must identify at least one, but no more than two, company applicants. Company applicants must be individuals, and the same information must be provided for company applicants as is required for beneficial owners.
There are two types of company applicants: a direct filer and an “individual who directs or controls the filing action.”
A direct filer is the individual who physically or electronically filed the document that created a domestic reporting company or registered a foreign reporting company with the secretary of state.
The “individual who directs or controls the filing action” is the individual who was primarily responsible for directing or controlling the document that created or registered the reporting company.
If a reporting company has one individual who directly filed the document and another individual who controlled or directed the filing, both individuals must be identified.
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FinCEN Identifier
Reporting companies, beneficial owners, and company applicants will have the option to obtain a unique identifier from FinCEN. Individuals who apply for a FinCEN identifier must provide the same information that would be submitted for beneficial owners and company applicants. Reporting companies may report a FinCEN identifier in lieu of the required information about beneficial owners and company applicants. A reporting company may apply for a FinCEN identifier by checking a box on the BOI reporting form.
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When to File?
Reporting companies will be able to file reports beginning January 1, 2024. Reporting companies in existence prior to January 1, 2024, must file their reports by January 1, 2025. Reporting companies created on or after January 1, 2024, but before January 1, 2025, will be required to file a report within 90 days of the earlier of the date of creation or registration with their governing jurisdiction. Reporting companies created on or after January 1, 2025, will be required to an initial report within 30 dayd of the date of creation or registration. If there is a change to the reported information, reporting companies must submit updated reports reflecting such change within 30 days.
Reporting companies will be required to file their reports electronically through the beneficial ownership secure system (BOSS) created by FinCEN. The system will not be available until January 1, 2024. FinCEN has advised that further instructions and guidance on how to complete and file the BOI report form will be released in the future.
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Penalties
If you provide false information or fail to report or update beneficial ownership information - you may be subject to significant penalties. The civil penalty for a violation is $500 per day, while criminal penalties include fines of up to $10,000, imprisonment for up to two years, or both. If a report is filed that contains inaccurate information and the reporting company did not have actual knowledge the information was incorrect, it will be given a 90-day safe harbor to submit an accurate report.
The CTA’s reporting requirements will impact many companies and will likely require a significant amount of information gathering and analysis. We recommend that you consult with your legal counsel to determine your reporting obligations.
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BOI FAQs
What is Beneficial Ownership Information Reporting?
Beneficial Ownership Information Reporting is a recent mandate that commenced on January 1, 2024, in the United States. This regulation applies to specific businesses, compelling them to disclose details about individuals who hold ultimate ownership or control, even if these individuals are not officially documented as legal owners. The primary aim is to counteract the misuse of shell companies by criminals seeking to conceal their identities and engage in illicit activities such as money laundering and terrorism financing.
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Why is Beneficial Ownership Information (BOI) Reporting crucial?
Anonymous shell companies have long been a preferred tool for criminals. Beneficial Ownership Reporting is instrumental in raising the barriers for criminals seeking to conceal true ownership. By making it more challenging for individuals to hide behind business entities, this reporting system aids law enforcement in tracking down bad actors and disrupts the operations of those with malicious intent.
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Which Companies Have to File a Beneficial Ownership Information Report?
The new rule encompasses most businesses established or registered to operate within the U.S. This includes corporations, limited liability companies (LLCs), and specific types of trusts. Notable exceptions to this rule include publicly traded companies and certain financial institutions.
The beneficial ownership rule is applicable to two main categories of businesses:
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Domestic Reporting Companies: These are entities like corporations, LLCs, and others formed by filing with a secretary of state or a similar office under the law of a state or Indian tribe.
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Foreign Reporting Companies: These include corporations, LLCs, and other entities created under the law of a foreign country but registered to conduct business in any U.S. state or Tribal jurisdiction.
In summary, the beneficial ownership rule covers most businesses in the U.S., excluding domestic sole proprietorships. Specific exemptions to the beneficial ownership reporting requirements exist, such as certain types of banks, credit unions, investment companies, insurance companies, and regulated public utilities.
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What Information Do Companies Need to Include in a Beneficial Ownership Information Report?
The following information needs to be included in the beneficial ownership report:
1. Company Information:
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The business’s legal name.
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Trade Names: Any registered "doing business as" (DBA) names used by the company
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The current street address of its principal place of business in the U.S.
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Jurisdiction of Formation or Registration: The state or country where the business was incorporated or registered.
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Taxpayer Identification Number (TIN): The company's federal tax identification number, such as its EIN.
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A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.
2. Beneficial Owner Information:
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Name: Full legal name of each beneficial owner.
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Date of Birth: Date of birth of each beneficial owner.
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Address: Residential address of each beneficial owner.
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Government-Issued ID Number: A unique identifier issued by a government agency, such as a passport, driver's license, or national ID card.
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The reporting company will also have to report an image of the identification documents.
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What Are the Penalties for Noncompliance with the Beneficial Ownership Information Report Rule?
Businesses are strictly obligated to file accurate and timely reports disclosing their beneficial owners as mandated by the Corporate Transparency Act of 2020.
Noncompliance will not be tolerated and may result in severe penalties, including:
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Financial Fines: Failure to file a required report or amendment by the deadline incurs a daily penalty of $500, accumulating to a maximum of $10,000.
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Criminal Charges: Willful noncompliance or intentional misrepresentation of information constitutes a felony, punishable by imprisonment for up to two years.
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Enhanced Penalties: In cases where noncompliance intersects with anti-money laundering violations, the potential imprisonment increases to 10 years.
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When Do I Need to File My Beneficial Ownership Information Report?
The deadline for filing your initial Beneficial Ownership Information Report (BOI Report) depends on when your company was created or registered:
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Before January 1, 2024: You have until January 1, 2025 to file your BOI Report. No rush, but don't forget about it!
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Between January 1, 2024 and January 1, 2025: You have 90 calendar days from the first official notice you receive about your company's creation or registration. This could be either:
When you receive actual notice from the government that your company is officially registered.
When the government first publicly announces your company's registration (usually through a secretary of state website).
Whichever comes earlier triggers the 90-day countdown.
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On or after January 1, 2025: The deadline is simpler - you have 30 calendar days from the first official notice you receive about your company's creation or registration. Again, same rules apply - actual notice or public announcement, whichever comes first.
Remember, timely filing is crucial to avoid potential penalties. If you're unsure about your deadline or need help with the filing process, feel free to contact us!
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Who can file a BOI report on behalf of a reporting company, and what information will be collected on filers?
When it comes to fulfilling your Beneficial Ownership Information Report (BOI Report) obligations, the Corporate Transparency Act grants flexibility in designating appropriate representatives. Your company may entrust the report filing to:
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Internal Designees: Authorized employees, such as officers, directors, or any other individual with familiarity and access to the necessary information regarding your company's beneficial ownership structure.
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Beneficial Owners Themselves: Holding direct control over the company, the beneficial owners may opt to personally file the BOI Report, ensuring firsthand accuracy and transparency.
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External Experts: Should you require specialized assistance, qualified legal counsel, accounting professionals, or dedicated BOI filing services can be commissioned to handle the reporting process on your behalf.
Contact Information for Verification:
To validate the legitimacy of the submitted BOI Report, FinCEN requires the individual acting as the filer to provide certain contact information:
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Full Legal Name: This serves as official identification and establishes clear accountability for the report submission.
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Accessible Communication Channel: An email address or phone number allows FinCEN to reach the filer for any necessary clarifications or follow-up inquiries.
Choosing a trustworthy and authorized individual with comprehensive knowledge of your company's beneficial ownership structure is paramount for accurate and timely reporting. By selecting a qualified representative, you mitigate the risk of non-compliance and potential penalties, ensuring a smooth and seamless fulfillment of your
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Identifying Your Beneficial Ownership Reporting Obligations: Who Must File?
Companies required to report are called reporting companies. There are two types of reporting companies:
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Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
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Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
There are 23 types of entities that are exempt from the reporting requirements (see Question C.2). Carefully review the qualifying criteria before concluding that your company is exempt.
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Are some companies exempt from the reporting requirement?
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.
The following table summarizes the 23 exemptions:
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Securities reporting issuer (e.g., publicly traded companies)
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Governmental authority (federal, state, local, tribal, or foreign)
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Bank (federally insured or chartered by a state)
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Credit union (federally insured)
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Depository institution holding company
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Money services business (registered with FinCEN)
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Broker or dealer in securities (registered with the SEC or state securities regulator)
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Securities exchange or clearing agency (registered with the SEC)
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Other Exchange Act registered entity (e.g., transfer agent, self-regulatory organization)
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Investment company or investment adviser (registered with the SEC)
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Venture capital fund adviser (registered with the SEC)
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Insurance company (licensed by a state)
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State-licensed insurance producer
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Commodity Exchange Act registered entity (registered with the CFTC)
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Accounting firm (registered with the PCAOB or a state regulatory body)
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Public utility (regulated by a state or federal agency)
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Financial market utility (regulated by a state or federal agency)
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Pooled investment vehicle (e.g., mutual fund, hedge fund)
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Tax-exempt entity (e.g., charitable organization, religious organization)
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Entity assisting a tax-exempt entity
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Large operating company (with total assets exceeding $1 billion and annual gross revenue exceeding $100 million)
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Subsidiary of certain exempt entities
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Inactive entity (not conducting business operations or holding financial assets)
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Who is a beneficial owner of a reporting company?
Understanding who truly controls a company is crucial for transparency and combating financial crime. This is where the concept of beneficial ownership comes in.
In simple terms, a beneficial owner is someone who:
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Exercises substantial control over the company, even without holding a formal title like CEO or owning a majority of shares. This could involve influencing key decisions, directing business activities, or holding substantial power behind the scenes.
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Owns or controls at least 25% of the company's ownership interests, directly or indirectly. This might involve holding shares, controlling trusts, or wielding influence through other entities.
It's important to remember that beneficial ownership extends beyond the usual suspects like major shareholders and named executives. The rules can delve deeper, potentially identifying certain family members, hidden partners, or complex ownership structures as beneficial owners.
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What is substantial control?
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:
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The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
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The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
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The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
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The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter
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What are Important decisions?
Important decisions are decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.
Important decisions can include:
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Strategic direction: Setting the overall course of the business, such as entering new markets, acquiring other companies, or developing new products.
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Financial management: Approving budgets, allocating resources, and making significant investments.
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Governance and leadership: Appointing key executives, approving major transactions, and shaping the company's internal structure.
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Risk management: Implementing policies and procedures to mitigate potential threats and ensure compliance with regulations.
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What are Important decisions?
Important decisions are decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.
Important decisions can include:
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Strategic direction: Setting the overall course of the business, such as entering new markets, acquiring other companies, or developing new products.
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Financial management: Approving budgets, allocating resources, and making significant investments.
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Governance and leadership: Appointing key executives, approving major transactions, and shaping the company's internal structure.
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Risk management: Implementing policies and procedures to mitigate potential threats and ensure compliance with regulations.