Beneficial Ownership Information Reporting: What It Means for Your Business

As we ride the wave of record-breaking new business applications from 2023 and continue to see impressive growth in 2024, driven by freelancers, e-commerce entrepreneurs, and gig workers, it’s an exciting time to be in business.

With this rise of new businesses, ensuring transparency becomes even more important. That’s where Beneficial Ownership Information (BOI) reporting comes in—a powerful tool many of the world’s leading economies have embraced to prevent financial crimes like money laundering and tax evasion. Now, the United States is catching up with this global trend.

In the United States, the BOI Reporting law quietly went into effect on January 1, 2024, as part of the Corporate Transparency Act (CTA). The law requires businesses to report information about beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Let’s explore what this law means for you and your business.

What is Beneficial Ownership?

Beneficial Ownership refers to individuals who own or control a company, partnership, or trust rather than just the legal entities or nominees. It focuses on identifying those who benefit from the entity’s assets and operations, ensuring transparency in ownership.

A beneficial owner under the CTA is an individual who directly or indirectly (1) owns or controls at least 25% of your company’s ownership interests, or (2) exercises substantial control over your business.

Who is Required to Report BOI?

• Corporations
• Limited Liability Companies (LLCs)
• Similar entities created by filing documents with a state office
• A foreign company which was registered to do business in any U.S. state or Indian tribe by such a filing
• Dissolved entities

Exemptions: FinCEN’s Small Entity Compliance Guide includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption.

What are the BOI Reporting Requirements?

Under the Corporate Transparency Act (CTA), a reporting company must disclose:

Company Information:

1. Legal name
2. Trade names or aliases
3. Principal business address (U.S. or international)
4. Jurisdiction of formation or registration
5. Taxpayer Identification Number or foreign tax identification details (if applicable)

Beneficial Owner Information (for each individual):

1. Name
2. Date of birth
3. Residential address
4. Identification number from an acceptable document (e.g., passport or U.S. driver’s license)

What are the BOI Reporting Deadlines?

• A company formed before 2024: BOI report due by January 1, 2025.
• A company formed during 2024: BOI report due within 90 days of formation.
• A company formed after January 1, 2025: BOI report is due within 30 days of formation.
• If a company dissolved completely before January 1, 2024, it does not need to report its beneficial ownership information to FinCEN. This is because it was never subject to the reporting requirements that began on January 1, 2024.
  • A company typically dissolves by filing dissolution paperwork, getting confirmation of dissolution, paying any taxes or fees, stopping all business activities, and closing all accounts.
• If a company existed as a legal entity at any time on or after January 1, 2024, it must report its beneficial ownership information to FinCEN, even if it has already wound up its affairs.
• Similarly, a company created or registered on or after January 1, 2024 must report its beneficial ownership information to FinCEN, even if it dissolved before its first report was due.
• Check the laws of the company’s jurisdiction to determine when it legally ceases to exist. A company that is temporarily dissolved or suspended (e.g., for not paying a fee) does not cease to exist legally unless the dissolution or suspension becomes permanent.

Any changes in BOI must be reported to FinCEN within 30 days of the change.

What are the Penalties for Failure to Report BOI?

• Civil penalties of up to $591 per day for each day the violation continues.
• Criminal penalties of up to $10,000 and/or imprisonment for up to two years.

How do I Prepare and File my BOI?

1. Collect the information about each beneficial owner, including name, address, date of birth, and identification number.
2. Submit the information using the BOI E-Filing System through FinCEN. Once a completed report is filed, you will receive confirmation of receipt.

Is there a Filing Fee?

There is no fee for submitting your beneficial ownership information report to FinCEN.

Beneficial ownership information reporting is essential for both enterprises and independent contractors. It fosters a transparent business environment, builds stakeholder trust, and helps combat financial crimes. By staying compliant with these regulations, businesses, and contractors can ensure they operate within the law and contribute to a more secure financial ecosystem.