Update: What is “Beneficial Ownership Information” reporting, and why do I care?

This article has been updated from the original version on September 17, 2024.

What is “Beneficial Ownership Information”? 

Beneficial Ownership Information (“BOI”) reporting is a federal law requirement that is estimated to impact more than 30 million businesses by December 31, 2024. In general, any entity, domestic or foreign, created by filing a document with a secretary of state (or equivalent state office) will be required to file a BOI report. Unlike many government requirements, BOI reporting targets small businesses.

If you are a small business owner, there is a significant likelihood that your business is subject to BOI reporting. BOI reports will not be filed with the IRS but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury. Penalties for willful noncompliance may result in criminal and civil penalties of $500 per day, up to $10,000, and up to two years of jail time.

Entities subject to BOI reporting requirements called “reporting companies,” must file reports identifying (1) the beneficial owners of the entity and, in some instances, (2) the individuals who have applied with specified governmental authorities to form the entity or register it to do business (“company applicants”).

What is a “reporting company?”

“Reporting companies” are companies required to file BOI reports. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

Reporting companies can include S corporations, disregarded entities, or certain legal entities formed and registered with a Tribal office or similar agency under Tribal law.

Does a reporting company include an entity that is not created by the filing of a document with the secretary of state or similar office?

No, an entity must file a document with the secretary of state or a similar office to be considered a reporting company. Examples could include certain domestic corporations, LLCs, or Homeowners Associations.

Who is a beneficial owner?

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company or (2) owns or controls at least 25% of the reporting company’s ownership interests. Beneficial owners may own or control a reporting company through trusts or through a trust arrangement with a corporate trustee. For more information on beneficial owners, including the meaning of “substantial control” and “ownership interest,” we recommend reviewing the Frequently Asked Questions (“FAQs”) posted by FinCEN.

Who is a company applicant?

As an initial matter, only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants. Up to two individuals could qualify as a company applicant: (1) the individual who directly files the document that creates or registers the company, and (2) if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Often, company applicants will be lawyers, law firms, or entity formation companies.

What type of information must be reported?

A reporting company will be required to report the following information about its beneficial owners and company applicants: the individual’s name, date of birth, address, and an identifying number from an acceptable identification document, such as a passport or U.S. driver’s license, as well as the name of the issuing state or jurisdiction. A copy of the identification document must also be provided.

Generally, BOI reports also must include the reporting company’s legal name, any trade names, the current street address of its principal place of business, its jurisdiction of formation or registration, and its tax identification number.

When do I have to report this information?

The deadlines for filing BOI reports depend on when the reporting company was created. The following chart illustrates the filing deadlines.

What if there is a change in the information reported?

If there is any change to the information reported about the company or its beneficial owners, an updated report must be filed no later than 30 days after the date of the change. Likewise, if a BOI report is inaccurate, the company must correct it no later than 30 days after it becomes aware of the inaccuracy or has reason to know about it.

Is there an annual requirement to file a BOI report?

No. There is no annual reporting requirement. Reporting companies must file an initial BOI report and corrected or updated BOI reports as needed.

How will I file my BOI report?

BOI reports are filed electronically through this secure filing system on FinCEN’s website.

Does every company have to file, or are there exemptions?

There are 23 types of entities that are exempt from BOI reporting. Exempt entities include publicly traded companies meeting certain requirements, many nonprofits, and entities that qualify as a “large operating company.” Generally, a large operating company is an entity that employs more than 20 full-time employees in the U.S., has an operating presence at a physical office in the U.S., and filed a federal income tax or information return in the U.S. for the previous year showing more than $5,000,000 in gross receipts or sales. More information on exemptions is available in FinCEN’s FAQs.

What are the criteria for the subsidiary exemption from the beneficial ownership information reporting requirement?

The entity’s ownership interests must be controlled or wholly owned, directly or indirectly, by certain exempt entities, such as governmental authorities, banks, credit unions, brokers or dealers in securities, insurance companies, accounting firms, public utilities, tax-exempt entities, or large operating companies. FinCEN’s FAQs provide more information on exemptions.

Who will have access to the BOI reports filed with FinCEN?

Federal, state, local, and Tribe officials and certain foreign officials who submit requests through a U.S. government agency will be permitted to obtain BOI for authorized national security, intelligence, and law enforcement activities. Financial institutions may also access BOI in certain circumstances. BOI reported to FinCEN will be stored in a secure, non-public database.

Where can I get more information?

In addition to its FAQs, FinCEN has issued a “Small Entity Compliance Guide.” The compliance guide, other resources, and reference materials are available on FinCEN’s website. Also, FinCEN has stated it will continue to provide guidance, information, and updates related to the BOI reporting requirements. Subscribe here to receive updates via email from FinCEN.

You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership and other information. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements or the collection of relevant information.