Oh BOI, oh BOI! New Beneficial Ownership Reporting Requirements for Small (and Large) Businesses

BOI is short for Beneficial Ownership Information, meaning, information about who actually owns or controls a company. On January 1, 2024 a new Federal regulation went into effect in the US that requires many companies to report this information to FinCEN, the Financial Crimes Enforcement Network, a bureau of the US Department of the Treasury. This new regulation was devised in an effort to curb money laundering and other financial crimes and applies to most company entities in the United States. Not to worry – existing companies have until January 1, 2025 to file the BOI report, so you have plenty of time to read this article and find out whether, when, and what you must file where.

Disclaimer: The author is neither a finance professional nor an attorney, and does not play one on TV. Therefore, nothing in this article should be construed as legal or financial advice. When in doubt, ask a legal or finance professional, and/or consult the FinCEN website, which contains extensive resources on this new regulation. There is also a 50-page Small Entity Compliance Guide on the FinCEN website, the salient points of which are summarized below.

Who must file?

A company that was created in the United States by filing a document with a secretary of state or a similar state or tribal office or similar office in a US territory is required to report BOI. Similarly, a foreign company that was registered with such a state or tribal or US territory office to do business in the United States has to file BOI as well.

You do NOT have to file if you are a sole proprietor, even if you have a fictitious business name (FBN, also known as doing business as, DBA) and/or obtained an Employer Identification Number (EIN) from the IRS and/or have a professional or occupational license.

You will have to file if you run a single-member LLC, regardless of how you are taxed (pass-through or as a corporation), because you formed the LLC by filing with your secretary of state. All other corporate structures and partnerships that were formed by filing with the secretary of state will also have to report who their beneficial owners are.

The FinCEN has an extensive FAQ on their website, including a flowchart to determine whether you must file or not. If your company structure involves a trust, foundation, or some other complicated entity structure, please refer to the FinCEN website or ask a relevant professional.

Of course, it wouldn’t be a regulation if there weren’t a number of exemptions for filing. Certain companies are exempt from filing, and the aforementioned FinCEN website lists 23 types of companies that are exempt. The entities that do not have to file BOI include inactive entities, tax-exempt entities, and certain entities in the financial sector, among others. The full list can be found at the FinCEN website. Regarding inactive entities, it should be pointed out that the entity will only qualify for the exemption (i.e., does NOT have to file) if it was in existence on or before January 1, 2020. If you started a company venture after that date and closed it down already such that it is now inactive, you still need to file a BOI report.

When and where do I have to file?

If the company was formed before January 1, 2024, you have until January 1, 2025 to file your initial BOI. If your company was formed in 2024, you have 90 days after formation to file. If your company will be formed in 2025 or later, you only have 30 days after formation to file. Further, if any of the BOI changes in the future, you must report those changes within 30 days.

The good news is that filing is free and is done entirely online via the FinCEN filing system. You can either download a PDF form to fill out offline and then upload that form or you can fill in an online form. According to the Paperwork Reduction Act notice on the online form, it should take somewhere between 90 and 650 minutes to fill out that form, depending on how complicated your company structure is.

Some folks prefer to hire somebody to file their LLC or corporate paperwork, but if there is/are just one or two beneficial owners and company applicants to report, it is entirely possible to fill out the form yourself. According to FinCEN, failure to file can result in civil and criminal penalties of up to $500 for each day that the violation continues. So it’s wise to not forget to file by the deadlines mentioned above!

Who is a beneficial owner? And what on earth is a company applicant?

According to FinCEN, a beneficial owner is somebody who either (1) exercises substantial control over the company or (2) owns or controls at least 25% of the company’s ownership interests. For example, if you are the senior officer in the company (CEO, CFO, president, other C-level executive, etc.) or if you have control over a company’s board of directors or if you have other decision-making authority, you have substantial control. Ownership interests include capital or profit interests, or equity or stock or voting rights, among others. The same FinCEN page mentioned above again has several graphics with explanations of these terms, and the FinCEN Small Entity Compliance Guide has numerous examples of who is and is not a beneficial owner.

In other words, for small businesses that are either LLCs or partnerships or corporations with few people, in most cases everybody involved in the company is a beneficial owner and therefore the information about that beneficial owner has to be reported to FinCEN. However, if your company hires an external accountant who is merely compensated for their services, then that accountant is not a beneficial owner. Similarly, if you hire a registered agent to file all the paperwork for your company before January 1, 2024, but that’s all that agent does, that agent is not a beneficial owner. However, that agent might be a reportable company applicant (see below).

If your company was formed after January 1, 2024, and you used somebody else to file the paperwork, that somebody else is a company applicant, and that person must also be reported. If your company was formed in 2023 or earlier, you do not have to report your company applicants, even if they differ from the beneficial owners. This means the registered agent above will have to be reported if you formed your company in 2024 or later. The good news is that while you have to report any changes in beneficial ownership within 30 days, you do not have to report changes in company applicants.

What information has to be filed?

For the company:

•  Legal name
• Trade names, such as “doing business as”
• Current street address of principal place of business in the US (PO boxes are not acceptable!)
• Jurisdiction of formation or registration
• Taxpayer Identification Number (TIN).

For each beneficial owner and company applicant:

• Legal name
• Date of birth
• Residential address
• Identifying number from an ID such as a driver’s license, US passport, etc.
• Scanned picture of said ID.

If the beneficial owner and the company applicant are identical, the same information still needs to be filled in twice. This also means that, if a beneficial owner moves, the changes in address have to be reported to FinCEN within 30 days! If a company applicant moves, the changes do not have to be reported.

What is a FinCEN identifier and do I need one?

At the very beginning of the reporting form, you will be asked whether you want a FinCEN identifier. A FinCEN identifier is another unique identifying number (similar to a TIN) which can be requested with the initial BOI filing and used for future BOI reporting. However, according to the FinCEN FAQ, it seems that while companies can be declared inactive with one last BOI report, there is currently no way to deactivate such a FinCEN identifier number, at least not at the time of writing. Since all changes, including changes in address, will have to be reported within 30 days for active companies and active FinCEN identifiers, and since FinCEN identifiers currently cannot be deactivated, it seems unwise to request such an identifier or else you will have to keep filing reports long after retirement.

The filing process

I opted to use the online form on the filing page. In my case, it took about 30 minutes to fill out the form, because I had read all the requirements and FAQs beforehand and had all the required documentation piled up next to me after writing this article. It might have taken even less time if I hadn’t had to scan in my driver’s license as the required picture ID for the beneficial owner.

As mentioned above, at the very beginning you’ll be asked whether you want a FinCEN identifier. I opted not to check that box, because it seemed more trouble than it’s worth, so I don’t know what would’ve happened if I had checked that box.

On the page following the company information, there’s a checkbox at the very top asking about whether this company is existing (before January 1, 2024) that’s easily overlooked. If you check this, the company applicant information portion of the form will be deactivated. Otherwise, you’ll be asked to fill in the company applicant information along with the beneficial owner information.

Overall, be careful if you use the online form instead of the downloadable version, because there’s no verification step and you’ll be taken straight to the submit page after filling out the information. If you entered incorrect information, you will have to file a correction later.

Summary

If your head is spinning now, here’s a summary:

• Domestic company formed/foreign company registered by filing with secretary of state or similar tribal or US Territory office before January 1, 2024 – file information by January 1, 2025 about:
  • The company itself
  • All beneficial owners
  • And changes in beneficial owners within 30 days of said changes (including changes of address!).
• Domestic company formed/foreign company registered by filing with secretary of state or similar tribal or US Territory office in 2024 – file information within 90 days of formation/registration about:
  • The company itself
  • All beneficial owners
  • Company applicants
  • And changes in beneficial owners within 30 days of said changes (including changes of address!).
• Domestic company formed/foreign company registered by filing with secretary of state or similar tribal or US Territory office in 2025 or later – file information within 30 days of formation/registration about:
  • The company itself
  • All beneficial owners
  • Company applicants
  • And changes in beneficial owners within 30 days of said changes (including changes of address!).

If you choose to retire, close down your company, and sail off into the sunset, you only need to file one last report before you close down, namely that your company is now inactive and thus exempt from future BOI filings. If you sail off into the sunset without doing so, you may get into trouble.

A final word of warning: Scammers are using this new FinCEN reporting requirement for their own nefarious purposes and impersonating FinCEN agents. You can go to the FinCEN website directly and fill out the form; in most cases it’s not that complicated! The FinCEN website ends in .gov. Do not enter information on websites with another domain ending. Alternatively, you can let a trusted representative take care of it – emphasis on trusted.

Again, nothing in this article should be construed as legal or financial advice, although I hope I was able to shed some light on this somewhat confusing new reporting requirement. However, when in doubt, ask a financial or legal professional or consult the extensive reference material on the FinCEN website.

---

About the Author

Carola F. Berger, PhD, CT is an ATA-certified patent translator, translating between German and English. She has been doing business in California since 2010, first as a sole proprietor without a fictitious business name, then doing business as CFB Scientific Translations for a long time. Since 2020, she has owned and operated CFB Scientific Translations LLC.