Beneficial Ownership Report: A Guide to Compliance and Filing

Alert: FinCEN has extended the filing deadlines to submit BOI Reports for certain reporting companies in response to some hurricanes. Check the U.S. FinCEN website to see if your company qualifies.

Starting, managing, and growing a business certainly isn’t for the faint of heart. Small business owners have a lot on their plates—and as of Jan. 1, 2024, they have one more thing to do: File a beneficial ownership report. 

Understanding beneficial ownership information reporting

A beneficial ownership report (BOI) is a report that is filed with a federal agency, and it discloses the identities of individuals who own or control a company. The idea is to promote corporate transparency and prevent illegal activities. This report is a relatively new requirement, so it’s important to understand what a BOI is, how it works, and whether it applies to you.

Key components of beneficial ownership reports

A beneficial ownership report includes several key components. As you move through the online form, you’ll fill out these sections:

• Filing type: Indicates whether the report is an initial filing, correction, or update.
• Company information: Includes the name, address, jurisdiction of formation, and tax ID number for the business.
• Company applicants: For initial BOI reports, you’ll need to include information about the person who filed the registration documents to form the business. This could be a lawyer or a certified public accountant (CPA), or it could be the business owner.
• Beneficial ownership information: Includes the name, address, birth date, and identifying document (like a license or passport) for each beneficial owner.

Legal framework and regulations

Many business owners may be unaware they even need to report beneficial ownership information. But this new requirement has been in the works at several agencies for the past few years.

Corporate Transparency Act overview

The Corporate Transparency Act (CTA) was enacted in 2021 as part of the Anti-Money Laundering Act. It requires U.S. corporations, LLCs, and similar entities to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The goal of the CTA is to combat money laundering and terrorism financing and promote corporate transparency.

Role of the Financial Crimes Enforcement Network (FinCEN)

FinCEN is the government agency that collects, maintains, and secures beneficial ownership information. You’ll file your BOI report with FinCEN, which will host the BOI database. FinCEN is also responsible for administering and enforcing the program, including imposing penalties when needed.

Beneficial ownership filing requirements and process

FinCEN estimates that in the first year alone, more than 32 million businesses will be required to report beneficial ownership information. Will you be one of them? All business owners should learn more about the filing requirements and process.

What businesses need to file a beneficial ownership report?

All business entities need to file, unless an exemption applies. Here are the 23 exemptions: Note that one of the most common exemptions is for nonprofits that have tax-exempt status. Sole proprietorships and general partnerships don't need to file because they aren't business entities that require registration with the state government.

Who is a beneficial owner?

A beneficial owner is an individual who owns 25% or more of a company’s equity, controls significant decisions, or holds substantial control over the business. What is “substantial control”? According to FinCEN guidance, someone is considered a beneficial owner if they:

• Are a senior officer, like a president, chief financial officer, general counsel, chief executive officer, or chief operating officer.
• Have the authority to appoint or remove the company’s officers, directors, or similar individuals.
• Direct, determine, or influence decisions about the company’s business, finances, or structure.

FinCEN also includes a “catch-all” provision including individuals with “any other form of control … exercised in new and unique ways.” It can all get a little confusing, so if you’re still wondering, “When is beneficial ownership information required?” it’s best to consult a professional, like an attorney or a CPA.

Step-by-step BOI filing guide

Once you determine whether you’re a reporting company and who your beneficial owners are, you’re ready to start thinking about filing your beneficial ownership report:

• Gather information. Collect the details you’ll need about each beneficial owner, including full name, date of birth, residential address, and unique identification number.
• Access the reporting system. Go to FinCEN’s beneficial ownership information reporting page. You’ll have the option to download a PDF that you can submit later or to submit your BOI report using the online form.  
• Fill out the report. Complete the beneficial ownership report form. Enter all required details accurately, including company information and each beneficial owner's details.
• Attach identification documents. Upload copies of the identification documents for each beneficial owner to verify their identity.
• Review and submit. Double-check all entered information for accuracy and completeness to avoid any errors. Submit the completed report through the FinCEN portal.
• Save your confirmation. Keep a copy of the confirmation and submitted report for your records. You might need it in the future.
• Update as needed. If you made a mistake or ownership information changes, update the report within 30 days by logging back into the FinCEN portal and filing a correction or update form.

Tips for collecting and verifying information

BOI reporting requirements can seem like a hassle, especially if your business has a lot of stakeholders. Get started as soon as possible and use these tips for collecting beneficial ownership information and making sure it’s accurate: 

• Use a standardized form. Develop a clear, standardized form for beneficial owners to complete so you can consistently collect information.
• Explain legal obligations. Inform them of their legal obligation to provide this information under the Corporate Transparency Act and the potential consequences of noncompliance.
• Set a clear deadline. Specify a deadline for responding and explain the importance of providing the information promptly.
• Send follow-up requests. Send multiple reminders through different communication channels, such as email, phone calls, and postal mail. Involve higher management or legal counsel if needed.
• Cross-check with public records. Once you receive information, compare it against public records and databases to make sure it’s accurate.
• Consult with legal and compliance. Work closely with legal and compliance professionals to review and validate the information.
• Document your efforts. Keep detailed records of all attempts to contact beneficial owners and gather and verify information.
• Report non-compliance. If beneficial owners fail to respond, report the issue to FinCEN. You don’t want to be penalized because of it.

Compliance and enforcement

In addition to collecting and reviewing beneficial ownership reports, FinCEN is also responsible for enforcing deadlines and penalties.

Beneficial ownership information reporting deadlines

Your BOI reporting deadline depends on when your business was created:

• Reporting companies created before Jan. 1, 2024, have until Jan. 1, 2025, to file an initial BOI report.
• Reporting companies created in 2024 have 90 calendar days to file. The countdown begins once you receive actual or public notice that your registration is effective.
• Reporting companies created any time in 2025 or beyond will have 30 calendar days from receiving actual or public notice.

If you need to file an update after your initial BOI report, you have 30 calendar days from when the change became official.

Penalties for non-compliance

The biggest reason businesses need to be aware of the requirements and deadlines for reporting companies is that the penalties for noncompliance can be costly: If you purposely fail to provide your beneficial ownership information or provide false information, you could face civil fines of $500 per day and criminal penalties including up to $10,000 in fines and up to two years in prison. If a beneficial owner provides you with false information, they can be subject to the same penalties.

Impact on small businesses and startups

Large operating companies are generally exempt from beneficial ownership reporting. That’s because they’re already subject to substantial regulatory oversight and transparency through other channels, such as public financial disclosures and corporate governance practices. However, the new requirements can have a big effect on small businesses and startups:

• Administrative burden. Gathering, verifying, and reporting ownership information requires time and resources, potentially diverting attention from core business activities.
• Compliance costs. Ensuring compliance can be expensive, especially for those who need to hire external advisors or implement new systems.
• Legal risks: Failure to comply exposes small businesses and startups to fines and penalties, which can be especially damaging for new or small ventures.
• Privacy concerns: Owners may have concerns about disclosing sensitive information.

While smaller businesses may face challenges, beneficial ownership reporting promotes transparency, which can build trust with investors, customers, and partners.

Practical examples and case studies

While the filing deadlines differ, essentially, any business that meets the requirements for reporting companies listed above will need to file an initial BOI report by Jan. 1, 2025. But you might still have questions in certain situations.

• Your company dissolved before Jan. 1, 2024. If you used to have a business, but it completely dissolved and ceased to exist before Jan. 1, 2024, you’re not required to file a BOI report. You’ll need to have filed articles of dissolution, received written confirmation, fully liquidated your assets, and closed all bank accounts.
• Your company dissolved before its initial report was due. If you register a business in 2024 (or any time after that), but it then dissolves within the 90-day or 30-day period you have to file your report, you do still have to file.
• Your company is inactive but has not fully dissolved. If your company has not permanently dissolved and liquidated, you’ll have to file a beneficial ownership report unless you meet the requirements for “inactive entities.” This includes that you haven’t sent or received more than $1,000 in the last 12 months, among other requirements.

Overcoming the challenges of BOI registration

Filing a beneficial ownership interest report can be a challenging task for limited liability companies and other small businesses. Legal language can be complex, and strict deadlines can be tough to meet for those without dedicated compliance teams. That’s why we make it easy to file your BOI report on time. Just answer a few questions about your beneficial owners, and we’ll prepare and file your report. File your beneficial ownership report with us today.

FAQs

What is a beneficial ownership report?

A beneficial ownership report is a document detailing the individuals who have substantial control over a company, providing transparency in company ownership.

Who is required to file a BOI report?

Any business that was registered/created with the state (LLCs, corporations) provided they aren't exempt from filing.

How do I get a beneficial owner report?

You can obtain a beneficial owner report by collecting the required information from the beneficial owners and submitting the appropriate forms to FinCEN.

Where do I get a beneficial ownership form?

Beneficial ownership forms can be obtained from the Financial Crimes Enforcement Network (FinCEN) website, through your company's compliance officer, or through our services.

What are the penalties for not filing a beneficial ownership report?

There are serious repercussions if businesses fail to file a beneficial ownership report or give false information. Civil fines are $500 per day. Criminal penalties include up to $10,000 in fines and up to two years in prison. If a beneficial owner gave you false information, they could face the same penalties.

Who is exempt from beneficial ownership reporting?

Certain entities, such as publicly traded companies and large operating companies, may be exempt from filing a beneficial ownership report.

What information is required in a beneficial ownership report?

The report must include details about the beneficial owners, such as name, address, date of birth, and identifying numbers (e.g., driver’s license or passport number).

How does beneficial ownership reporting help combat money laundering?

It increases corporate transparency and helps authorities track and prevent illicit activities like money laundering and terrorist financing.

What is the deadline for filing the beneficial ownership report?

A reporting company created in 2025 or later has 30 days to file its report. A reporting company created before Jan. 1, 2024, must file a report by Jan. 1, 2025. A reporting company created in 2024 has 90 calendar days to file a report. Ongoing reporting is required for new entities and changes in ownership.

What should I do if my beneficial ownership information changes?

If there are changes in a company's beneficial ownership information, the reporting company must update and submit the new information to FinCEN within the specified time frame.

How are foreign and domestic reporting companies different?

When reporting beneficial ownership information, you'll need to do so as either a foreign or domestic company, with key differences between the two options.

Foreign reporting companies are those that are created or organized in another country but operate within the U.S. The need for a beneficial ownership report is triggered when foreign reporting companies apply to conduct business within the U.S.

Domestic reporting companies are those that are created or organized within the U.S. The need for a beneficial ownership report is triggered when domestic reporting companies are first formed within the U.S.