Beneficial Ownership Information: Reporting, Requirements, and Documents

In 2022, the Corporate Transparency Act (CTA) added a rule for businesses to file the beneficial ownership information report with the Financial Crimes Enforcement Network (FinCEN).

The beneficial ownership information (BOI) report identifies who owns or manages a business. The objective of the report is to control corrupt/illicit business activities run by shell companies. 

In this blog, we will answer:

1. What is a beneficial ownership information report? 

2. Who needs to file the beneficial ownership information report? 

3. How do I file the beneficial ownership information report for my company? 

4. What are the requirements for the beneficial ownership information report? 

5. When is the deadline for the beneficial ownership information report?

What is a beneficial ownership information report?

A beneficial owner is an individual who enjoys the benefits of ownership of a legal entity while the on-paper ownership of the entity is in another name. 

The beneficial ownership report gives insights into a business's "beneficial owners," who are individuals meeting at least one of the following conditions: 

1. They exert considerable control over the corporation or LLC. 

2. They possess 25% or more of the entity ownership interest. 

3. They derive significant economic advantages from the entity assets. 

FinCEN's requirement for this information helps them obtain a transparent understanding of a company's ownership and management structure.

Who needs to file a beneficial ownership information report? 

All LLCs, corporations, and other businesses created or registered to do business in the United States must file a report unless they qualify for an exemption:

1. Newly created entities: Reporting companies formed or registered on or after January 1, 2024, are subject to BOI filing within 90 days of incorporation. 

   
   

2. Most existing entities: Reporting companies existing before January 1, 2024, have a deadline of January 1, 2025, to file their initial BOI report.

Beneficial ownership reporting is mandatory for U.S. and foreign companies registered to conduct business in the U.S. or with an American Indian tribe.

Which businesses are exempted from beneficial ownership filing?

Exempted entities include: 

1. Entities registered under the Commercial Exchange Act or other Exchange Acts 

2. Public Utilities 

3. Governmental authorities 

4. Insurance companies and state-licensed insurance producers 

5. Pooled investment vehicles 

6. Securities-related businesses 

7. Financial institutions (e.g., banks, credit unions, investment companies) 

8. Tax-exempt organizations Inactive entities (based on specific criteria) 

9. Subsidiaries of exempt entities 

10. Large operating companies with significant gross receipts, employees, and a physical U.S. office

How do I file the beneficial ownership information report for my company?

Step 1: Identify the beneficial owners 

Here's who qualifies as a beneficial owner for BOI filing purposes:

1. Individuals with 25% or more ownership: Any individual who directly or indirectly owns or controls 25% or more of the company's voting rights or equity interests is considered a beneficial owner.

   
   

2. Control through other means: Even if ownership falls below the 25% threshold, individuals exercising significant control over the company through agreements, voting trusts, or other means also qualify as beneficial owners. 

Step 2: File your BOI report online on the FinCen website, Click here.

FinCEN has created a secure online portal for submitting the BOI report. There are two filing options available: PDF or electronic filing. Note that the report cannot be filed via fax or mail. 

The portal has been active and accepting reports since January 1, 2024. There is no associated filing fee.

If you want to skip the headache and simplify the process, Commenda can help: 

Schedule a free BOI consultation call→

What information do I need to file a BOI report?

When filing the report, companies must submit the following information for each beneficial owner:

1. Full Legal Name: The legal first name, middle name (if applicable), and last name of the beneficial owner.

2. Date of Birth: The beneficial owner's date of birth.

3. Current Address: The beneficial owner's residential street address, city, state, zip code, and country.

4. Unique Identifying Information: A U.S. driver's license number, passport number, or other identifying information issued by a U.S. state or federal government agency.

Beneficial Ownership Information Report Deadlines

The deadline for filing an initial BOI report depends on when your business was formed or registered:

1. Newly Created Entities (After January 1, 2024): must file within 90 calendar days of the date they receive notice that their entity creation or registration is effective.

2. Existing Entities (Before January 1, 2024): must file by January 1, 2025.

Updating and correcting the Beneficial Ownership Information Report

Beyond the initial filing, companies are obligated to keep their BOI information up-to-date with FinCEN. This includes filing an amended BOI report within 30 calendar days of any changes to the reported information, such as: 

1. Changes in Beneficial Ownership: Changes to a beneficial owner's ownership stake or control over the company.

2. Changes in business information: A change to core business information, like official address or registration status. 

3. Changes in Personal Information: Any updates to a beneficial owner's legal name, address, or identifying information.

What happens if I don’t file a beneficial ownership report?

Failure to file a BOI, either due to forgetfulness or intentional neglect, can have significant consequences under the Corporate Transparency Act. 

Civil penalties may include daily fines of up to $500, while criminal penalties can result in fines of up to $10,000, imprisonment for up to three years, or a combination of both. Furthermore, senior officers of the business can be held personally accountable for non-compliance. 

Therefore, timely filing of your BOI is crucial to avoid these potential penalties.

Conclusion: Maintaining Compliance Through Proactive Measures

Understanding BOI filing requirements and deadlines is essential for businesses subject to the CTA. By familiarizing yourself with the regulations, identifying your beneficial owners accurately, and filing reports promptly, you can ensure compliance and avoid potential penalties. Remember, maintaining accurate BOI records is an ongoing process.

If you want to skip the headache and simplify the process, Commenda can help: 

Schedule a free BOI consultation call→