Beneficial Ownership Information Form and Requirements
Most new as of 2024 businesses are required to file within 90 days of registering the company
Most new businesses starting January 1st, 2025 are required to file within 30 days of registering the company
Other businesses have until the end of 2024
Downloadable Form is at the end of this article
What is the Beneficial Ownership Information Form and Who Must File It?
In the evolving landscape of corporate transparency and anti-money laundering efforts by the U.S. government. Business owners have another reporting form to add to the pile.
Financial Crimes Enforcement Network (FinCEN) has introduced several regulations to increase accountability in the business sector and with more regulations comes more forms. We now have what’s known as the Beneficial Ownership Information Form, which aims to help authorities track the ownership of corporations and other legal entities.
What is the Beneficial Ownership Information Form?
The Beneficial Ownership Information (BOI) Form is a mandatory filing requirement introduced as part of the Corporate Transparency Act (CTA), which became law on January 1, 2021. This Act mandates certain businesses to report information regarding their beneficial owners. The purpose of the form is to enhance transparency in the business sector and prevent the misuse of anonymous companies for illegal activities such as money laundering, tax evasion, and financing terrorism.
The Beneficial Ownership Information form is filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury. This form requires businesses to disclose identifying information about individuals who have significant control or ownership of the entity. The information gathered is intended to be kept confidential and will only be accessible by law enforcement agencies and other authorized entities.
What Information Must be Reported?
The BOI form collects specific information about a company’s beneficial owners. Each beneficial owner must provide the following details:
- Full Legal Name
- Date of Birth
- Current Residential or Business Address
- A Unique Identifying Number (from an acceptable document such as a passport, driver’s license, or other government-issued ID)
Who Must File the Beneficial Ownership Information Form?
The Corporate Transparency Act broadly defines which entities are required to file the BOI form. Essentially, the filing requirement targets entities that are formed by filing a document with a Secretary of State or similar office, including corporations, limited liability companies (LLCs), and similar legal entities. Here is a breakdown of the types of businesses that must file:
- Corporations and LLCs: Any domestic corporation or LLC that is registered in the U.S. must file the BOI form.
- Foreign Companies: Foreign entities that are registered to do business in the U.S. are also required to file.
- Other Legal Entities: Partnerships, limited liability partnerships (LLPs), business trusts, and certain types of nonprofit organizations may be subject to the filing requirement if they are registered by filing with the state.
Exemptions from Filing
Not all entities are required to file the BOI form. The Corporate Transparency Act provides exemptions for specific types of entities that are already subject to substantial regulatory oversight. Some of the key exempt entities include:
- Publicly Traded Companies: Companies that are listed on a U.S. stock exchange are exempt because they are already subject to stringent SEC reporting requirements.
- Banks: Financial institutions, including banks and credit unions, are exempt due to their existing AML and Know Your Customer (KYC) regulations.
- Government Entities: State and local government entities are exempt.
- Larger Operating Companies: Any business with more than 20 full-time employees, over $5 million in revenue, and a physical office in the U.S. is exempt from filing.
- Inactive Entities: Entities that are no longer operating and have no assets are also exempt from filing.
When Must the Beneficial Ownership Information Form Be Filed?
The timing of when the Beneficial Ownership Information Form must be filed is crucial for both existing and newly formed entities.
- Existing Entities: Companies that were in existence before January 1, 2024, must file the BOI form no later than January 1, 2025. This gives these entities a one-year period to comply with the new reporting requirements.
- Newly Formed Entities: Any entity formed or registered on or after January 1, 2024, must file the BOI form within 30 days of formation or registration. This requirement ensures that newly created entities are immediately included in the system and are subject to the transparency measures from the outset.
- Changes to Beneficial Ownership: If any changes occur in the beneficial ownership of an entity after the initial filing, the company must update its BOI form within 30 days of the change. This includes changes in control, ownership, or the information provided for any beneficial owner.
Who is considered a beneficial owner of my company?
A beneficial owner is any individual who, directly or indirectly
- Exercises substantial control over a reporting company, or
- Owns or controls at least 25 percent of the ownership interests of a reporting company
An individual might be a beneficial owner through substantial control, ownership interests, or both. Reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial owner.
A reporting company can have multiple beneficial owners.
For example, a reporting company could have one beneficial owner who exercises substantial control over the reporting company, and a few other beneficial owners who own or control at least 25 percent of the ownership interests of the reporting company.
A reporting company could have one beneficial owner who both exercises substantial control and owns or controls at least 25 percent of the ownership interests of the reporting company. There is no maximum number of beneficial owners who must be reported.
Penalties for Non-Compliance
Non-compliance with the BOI filing requirements can lead to significant penalties. Willfully failing to file the required BOI form or providing false or fraudulent information can result in both civil and criminal penalties. Civil penalties can include fines up to $500 per day for each day the violation continues, while criminal penalties can lead to fines of up to $10,000 and imprisonment for up to two years.
These penalties highlight the importance of timely and accurate filings to avoid potential legal and financial consequences.
Entities subject to the BOI filing requirement should take careful note of the deadlines and ensure that they provide accurate and complete information to avoid penalties. Companies that are unsure whether they must file or what information to provide should consider consulting with a legal or tax professional to ensure compliance.