Understanding Beneficial Ownership Information: Do I Need to File BOI and How?

BOI (Beneficial Ownership Information Reporting) Requirements Content

• What is Beneficial Ownership Information (BOI)?
• Free Self Assessment for BOI reporting requirement.
• Who Must Report the BOI? Do I Need to File a BOI Report?
• What are the BOI Reporting Requirements?
• When is the Deadline for BOI Initial Report?
• What are the Penalties for Not Filing or Late Filing the BOI?
• How to File the BOI?

Running a small business comes with its fair share of challenges, especially when it comes to understanding all the rules and regulations out there. One important piece of this puzzle is something called Beneficial Ownership Information, or BOI for short. While it might sound complex, in simple terms, BOI is all about knowing who really owns and controls a business. This might seem straightforward, but it's a big deal in the business world.

Why is this important? Well, it helps prevent shady dealings like money laundering and illegal activities. 
Illicit actors sometimes use shell companies and front businesses in the U.S. to hide their identities and launder money through the financial system. To combat this, governments and financial institutions focus on maintaining transparency and honesty in business transactions.

As a small business owner, you might be wondering what BOI means for you. Do you need to file it? How do you do it? What happens if you don't?

Let's start by saying that you highly probably need to file BOI report with FinCEN.

This guide is here to answer these questions in simple language, helping you understand BOI in a way that makes sense for your business. We'll cover what BOI is, who needs to worry about it, what you need to do to stay compliant, when you need to do it by, what could happen if you don't, and how to actually file this information. So, let's dive in and make sense of BOI for your small business!

Unsure whether BOIR requirement applies to you? We can help you to decide. Take your free assessment now.

What is Beneficial Ownership Information (BOI)?

Every year in the United States, millions of small businesses are established as corporations, limited liability companies, or under other corporate structures. Unfortunately, these types of corporate structures can be exploited by illicit actors. They use shell companies and front businesses to hide their true identities and funnel their illegal earnings through the U.S. financial system.

This is why, on September 30, 2022, the Financial Crimes Enforcement Network (FinCEN) released new guidelines for reporting Beneficial Ownership Information (BOI), as outlined in the Corporate Transparency Act (CTA). Subsequently, FinCEN began accepting beneficial ownership information reports on January 1, 2024.

 According to FinCEN “Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.”

In other words, Beneficial Ownership Information is all about identifying the people who have a significant influence over a company, either by owning it directly or by having a level of control behind the scenes.

Hint! Who has access to beneficial owner information? FinCEN is set to provide access to beneficial ownership information in a phased approach to several third parties including federal and state agencies, as well as financial institutions which need this information for customer due diligence requirements. For more information regarding this please refer to the FAQs part "O. Access to Beneficial Ownership Information".

Who Must Report the BOI?

If your company is considered as a "reporting company", then you are required to file BOI. But, what is a reporting company? According to FinCEN, there are 2 types of reporting companies.

Domestic Reporting Companies:

• These include corporations, limited liability companies, and any other entities formed by filing paperwork with a secretary of state or similar office in the U.S.

Foreign Reporting Companies:

• These are entities, like corporations and limited liability companies, established under foreign country laws but registered to operate in the United States by filing documents with a secretary of state or similar office.

In simple terms, any entity formed by submitting business formation documents to a secretary of state or a similar office will be affected.

HINT! There are 23 types of entities that don't have to report BOI and it is highly probable that you are not one of the exceptions (see Question C.2 for details). Make sure to check the criteria thoroughly to see if your company is one of the exceptions not required to file BOI. For example, there are exemptions for certain inactive entities and large companies (e.g. reported more than $5 million in gross receipts or sales in the previous year) (see for more details). 

We can complete and file BOIR for you.

What are the BOI Reporting Requirements?

You may be wondering about the specific information FinCEN requires for your preparation. There are 3 different sections to focus on: the reporting company, the beneficial owner(s), and the company applicant(s). Let's see specific details you have to report about these 3 sections.

At the beginning, 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.

Reporting Company Information

• Company legal name
• Any trade name or “doing business as” name
• Company tax identification number 
• Company jurisdiction of formation or first registration
• Current US address

Hint! In the reporting process, U.S. reporting companies must provide the street address of their principal place of business in the United States, usually their headquarters. If a reporting company has no principal place of business in the U.S., it must report to FinCEN: 

Option 1: The primary location where it conducts business in the U.S., such as a foreign reporting company’s U.S. headquarters.
Option 2: If it conducts business at multiple U.S. locations, the address of any location where it receives important correspondence.
Option 3: If it has no U.S. business locations, the U.S. address of the person designated to accept legal service on its behalf, commonly known as the registered agent.

Beneficial Owner(s)

Who is the Beneficial Owner?

A beneficial owner is an individual who either directly or indirectly:

• Exercises substantial control over the reporting company, OR
• Owns or controls at least 25% of the reporting company’s ownership interests (Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.)
• An individual is considered to have substantial control over a reporting company if they hold a senior officer position, have the power to appoint or remove officers or directors, play a key role in making important decisions, or possess any other form of significant influence over the company. Please refer to the FinCEN chart for further clarification. 

IMPORTANT! The challenging aspect can be identifying beneficial owners through their substantial control over your company. For more details on how to determine individuals have substantial control and see examples, you can visit Small Entity Compliance Guide. 

For each individual who is a beneficial owner, a reporting company will have to provide:

• The individual’s name
• Date of birth
• Residential address
• Identifying document number from an acceptable document (e.g., US passport, state issued driver’s license, or foreign passport) and the name of the issuing state or jurisdiction of identification document
• Image of an identifying document (displaying the identifying number)

Company Applicant(s)

Who is the Company Applicant?

The individual who directly files the document that creates or registers the company. This individual could be an owner, manager, or an agent representing the company. Alternatively, it could be an external service provider like a lawyer, accountant, or an incorporation service, who handles the filing process for the company.  The company can report up to 2 company applicants who are primarily responsible. Please refer to the FinCEN chart for further clarification.

Hint: If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. There's no need to provide details about its company applicants.

IMPORTANT! For more details on how to determine individuals have substantial control and see examples, you can visit Small Entity Compliance Guide. 

For each individual who is a company applicants, a reporting company will have to provide:

• The individual's name
• Date of birth
• Current address (business or residential)
• Identifying document number from an acceptable document (e.g., US passport, state issued driver’s license, or foreign passport) and the name of the issuing state or jurisdiction of identification document
• Image of an identifying document (displaying the identifying number)

We can complete and file BOIR for you.

When is the Deadline for Initial BOI Report?

Companies existing (incorporated) before January 1, 2024:

• File the initial report the latest by January 1, 2025.

Companies created (incorporated) or registered on or after January 1, 2024, and before January 1, 2025:

• File the initial report within 90 calendar days after being notified that the company's creation or registration is effective.
• The 90-day period starts either from when the company is actually notified or when a secretary of state (or similar office) publicly announces the company's creation or registration, whichever comes first.

Companies created (incorporated) or registered on or after January 1, 2025:

• File the initial report within 30 calendar days after being notified that the company's creation or registration is effective.

Hint! In addition to submitting your initial BOI report, you are required to file an updated report within 30 calendar days whenever there's a change to the information you initially provided.

What are the Penalties for Not Filing or Late Filing the BOI?

Under the Corporate Transparency Act, if someone intentionally ignores the BOI reporting rules, they could face a daily fine of up to $500 for as long as the violation lasts. Additionally, this civil penalty is adjusted each year for inflation, please refer to the FAQs.

Additionally, they might also face criminal charges, including up to two years in jail and a fine of up to $10,000.

This could happen if they deliberately don't file a BOI report, submit false information in the report, or fail to update the information they've already reported.

How to File the BOI?

Starting on January 1, 2024, BOI reports can be filed electronically using FinCEN’s secure filing system.

If you need to file your BOI reporting, you may have two options:

You can do it yourself. If you want to learn more about how to file BOI reporting, visit our blog post titled "A Step-by-Step Guide to Filling BOI Reporting of FinCEN". In this post, we offer a step-by-step guide on how to complete the BOI, along with an example to illustrate the process.

Hint! VERY IMPORTANT: FinCEN published a warning about fraudulent attempts. Be wary of scams involving payment requests, as there are no fees to file BOI with FinCEN and any such requests are fraudulent. Additionally, avoid interacting with suspicious links or QR codes found in emails or letters, and do not trust correspondence referring to “Form 4022” or “Important Compliance Notice” as these are not legitimate FinCEN forms. Also, disregard any communications claiming to be from a non-existent “US Business Regulations Dept.” You can verify the authenticity of any request by contacting FinCEN directly. 

We can do it for you. Just click the image below and purchase our BOI Reporting service.

Stay Compliant with Tukel Accounting

Navigating the Beneficial Ownership Information (BOI) reporting can be challenging, especially for business owners new to such regulations.Understanding and complying with BOI requirements is crucial, but it doesn't have to be a daunting process. If you're looking for assistance with BOI reporting, our team is here to help.

Our services extend beyond BOI reporting to support your U.S. company in bookkeeping, accounting, taxes, payroll, and more. We offer a range of flexible pricing plans, designed to provide effective solutions for managing your U.S. business efficiently. Starting with us is straightforward. Enhance your business's success by arranging a discovery call with our sales team at Tukel Accounting to discuss your specific needs today. Let us help you navigate the BOI reporting process and keep your business on track.

Disclaimer:

_{This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Tukel Inc. is not responsible for updating or revising any information presented herein.You can refer to the FinCEN site for the latest updates and rules. Accordingly, the information provided should not be relied upon as a substitute for independent research. Tukel Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.}