FinCEN mandates most LLCs report beneficial ownership information. Details about the company, beneficial owners, and company applicants are a must.
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by Swara Ahluwalia
Swara has over six years of writing experience in the software, manufacturing, and small business segments. When she ...
Updated on: October 29, 2024 · 12 min read
Launched through the Corporate Transparency Act (CTA), the Beneficial Ownership Information Report (BOIR) is a new compliance requirement for LLCs registered to do business in the U.S. This report is designed to help the Financial Crimes Enforcement Network (FinCEN) prevent illegal activities and financial crimes that threaten the country's economic fabric.
This guide has all the information you need to file a beneficial information report for your LLC. We explain the reporting requirements, detail the filing procedure, and even provide practical tips on how your small business can easily adhere to this new law.
The Federal Corporate Transparency Act introduced significant reforms to anti-money-laundering laws—the main one being beneficial ownership information (BOI) reporting. Beneficial ownership information refers to providing accurate information about who actually owns or runs the legal business entity.
Certain businesses, including corporations and LLCs, are required to identify individuals associated with the company. As defined by the CTA, a beneficial owner is any individual who owns or controls at least 25% of an LLC or exercises substantial control in any of the following ways:
The Corporate Transparency Act is a newly established federal law that requires LLCs meeting certain criteria, known as "reporting companies," to provide beneficial owner information to the Financial Crimes Enforcement Network under the U.S. Department of the Treasury.
Congress initiated the CTA in 2021 to strengthen and secure the business environment while promoting transparency and increasing accountability. For instance, by knowing who truly owns and controls businesses, FinCEN can clamp down on the use of shell companies that run illegal activities.
The law’s reporting requirements came into effect on Jan. 1, 2024. In addition to initial BOI reporting obligations, the law includes clauses on when a reporting company needs to update its original BOIR filings.
Beneficial ownership information reporting plays a vital part in enabling FinCEN to do its job. Only when the federal government has access to updated and accurate information about each company's beneficial owners will it be able to effectively investigate financial crimes, prevent money laundering and human trafficking, and protect fair-trade practices.
You might ask, "Why is this important for my company?" When your limited liability company provides beneficial ownership information to FinCEN, you are being a responsible business owner doing your part in safeguarding the community and country. More importantly, compliance with this uniform reporting requirement saves you from civil and criminal penalties. You may even face jail time and a fine of $10,000 if you willfully disregard this federal legislation.
LLCs that qualify as “reporting companies” are required to report beneficial ownership information to FinCEN. Reporting companies include domestic and foreign (formed outside the U.S.) LLCs.
Domestic reporting companies are limited liability companies formed by filing a document with a Secretary of State or any similar office under the state or Tribal law. If you established your LLC by filing articles of organization with your state's Secretary of State office, you'd be classified as a domestic reporting company.
Foreign reporting companies are LLCs initially formed in a foreign country and then registered to do business in the U.S. by submitting a document with the Secretary of State or similar government authority. If your LLC was initially formed in Germany and then registered to do business in Delaware, then you would be a foreign reporting company.
If your business meets either of the listed definitions, you must report your company's ownership interests unless you fall under an exemption.
The CTA has a list of 23 business entities that are exempt from filing Beneficial Ownership Information reports. If your LLC satisfies one of the following requirements, you may be exempt from reporting requirements:
The other exemptions apply to companies operating in heavily regulated industries like banking and insurance, publicly traded companies, and those registered under the Commodities Exchange Act.
If you're wondering, "Is my company exempt?" speak to a business attorney. They can help you carefully review the exemption criteria and tell you if your LLC gets a free pass from beneficial owners' reporting.
As stated earlier, a beneficial owner is an individual who has at least 25% of the reporting company's ownership interests or can exercise substantial control over the company's operations. Apart from equity, ownership interests can be established through shares of stock, voting rights, and capital or profit interests.
Every LLC will have at least one beneficial owner. If you run a single-member LLC, you are the beneficial owner. In multiple-member LLCs, the beneficial owner is anyone who meets the 25% ownership threshold or makes critical business and financial decisions. Here's an example: French Window LLC is a three-member LLC, where Member A has a 75% ownership stake, Member B has 20% ownership and serves as the company director, and Member C has 5% ownership. In this instance, Members A and B will both be beneficial owners based on ownership and control.
Beneficial owners have to provide vital details about themselves, such as their complete legal name and government-issued ID number, in the beneficial ownership report. Beneficial owners actively contribute to the overall goal of increasing transparency and combating financial crime when they fulfill their BOI reporting obligations.
Effortlessly file the BOI for your LLC by using our detailed guide.
The BOI requires detailed information and documentation about your LLC, its beneficial owners, and possibly even company applicants.
A company applicant is the person who actually filed your LLC formation paperwork with the Secretary of State. If you utilized a formation service to register your LLC, the company applicant would be the formation company's employee who completed the paperwork.
Only limited liability companies formed on or after Jan. 1, 2024, have to provide company applicant information to FinCEN.
Gather the following information for each beneficial owner and company applicant (if applicable):
To start the online application process, go to FinCEN’s BOI reporting portal and select the "BOI E-Filing" option.
You will be led to a page where you can select your filing method—online or PDF. To use the latter option, your computer must have Adobe Acrobat Reader installed. While you can complete the PDF at your own pace, you'll have to go back online to submit it.
The online filing option is certainly more convenient, but it must be completed in one sitting. The system is not equipped to save answers you can return to later. FinCEN estimates the Beneficial Ownership Information Report can take anywhere between 90 to 120 minutes to complete, so ensure you have enough time on hand.
The beneficial ownership information form has four main sections: Filing, reporting company, beneficial owners, and company applicant. Each section needs to be completed accurately.
A substantial amount of data goes into a company's Beneficial Ownership Information Report. These tips will ensure accurate completion and help you avoid common filing mistakes.
You can start the submission process once you're sure all the fields have been completed. To submit your online form, you'll first need to validate your answers. If there are errors like missing information, the system will highlight them so you can go back and fix them. After all is done, hit "Submit."
If you use the PDF form, you'll need to return to the BOIR filing page and select the "Submit PDF" option. The system will again ask you to validate your answers before you can officially submit the PDF.
Timing is of the essence with BOI reports. Below are important filing deadlines you can't afford to miss.
After you submit your LLC's Beneficial Ownership Information Report, don't forget to download a submission confirmation. Select the "Download Transcript" button, and you'll get a PDF for your records.
Although completing the forms may not be difficult, it's easy to miss something or make a mistake with everything you have to do as a small business owner. Having professional help on your side can save you from civil and criminal penalties and give you peace of mind.
If you have a complicated LLC structure or multiple LLCs, consulting an attorney or accountant is a must. They can ensure your form is completed on time and as per FinCEN’s standards.
Contrary to popular belief, beneficial ownership reporting is not a once-and-done situation. It requires ongoing compliance and updates.
Keeping your BOI current is just as crucial as the initial filing. If any changes occur to one's LLC, especially related to the beneficial ownership information, reporting companies are required to update their reports. This step ensures that the information held by FinCEN stays current and accurate.
For instance, if you realize you have misspelled a beneficial owner's name or address, you need to report the correction. You get 30 days from the day you catch the error to rectify your filing.
The Federal Corporate Transparency Act mandates that changes in beneficial ownership also be reported. You can alert FinCEN about ownership changes through their secure online portal. Go to their main filing page and select the "Update prior report" option if your LLC has experienced one of the following changes:
The deadline for updating initial BOI reports is 30 days from when the change took effect. Keep in mind that you’ll have resubmitted unchanged information alongside the corrected data.
Here are some handy tips that'll make it easier for limited liability companies to satisfy the Federal Corporate Transparency Act reporting mandate.
Here are some of the most frequently asked questions on BOI reporting requirements.
You can file the BOI online through FinCEN's filing platform. There are two filing options: A PDF or online. Set aside at least 90 to 120 minutes to complete the report and refer to our detailed steps for filing guidance.
If administrative paperwork isn't your strong suit, you can offload the filing to a BOIR filer. LegalZoom can handle this new compliance requirement for just $149.
There are no costs for filing a BOIR directly through FinCEN’s website. There may be a slight cost if you decide to use a third-party service for filing purposes.
No, you haven't. We understand there may be cases where you may have submitted ownership information to different government or financial institutions like the bank or IRS, but that doesn't mean you no longer have to report information to FinCEN. You must submit the beneficial ownership report directly to them.
Yes, there are 23 exemption categories that aren't required to file beneficial ownership information. Tax-exempt entities, for instance, don't have BOI reporting obligations.
However, it's highly unlikely for the majority of these reporting company exemptions to apply to LLCs. The only exemption your LLC may qualify for is that of being a large operating company. FinCEN defines large operating companies as U.S. businesses that have more than 20 full-time employees and had gross sales of over $5 million in the last tax year [PDF].
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