Beneficial Ownership Information: Important Information You Need to Know for 2024

On January 1, 2024, the Beneficial Ownership Information Reporting Rule goes into effect. This is a US federal law that requires many companies in the US to disclose beneficial ownership information (who owns and controls the company) to the US government. The Beneficial Ownership Information reporting is part of the Corporate Transparency Act enacted by Congress in 2021.

What do business owners need to know about this new reporting rule? What do you need to do to stay compliant?

 

In this article, I share all the important details small business owners like you need to know about Beneficial Ownership Information (BOI) reporting going into 2024.

 

What is Beneficial Ownership Information?

Beneficial Ownership Information is information that identifies the person or people who own or control a company. People who own or control a company both directly and indirectly are included in this category. 

A beneficial owner is defined as someone who exercises “substantial control” over the company or someone who owns or controls at least 25% of the company’s interests. A company can have multiple beneficial owners.

Financial Crimes Enforcement Network (FinCEN) has shared a useful checklist to determine who is a beneficial owner of a company.

 

What purpose does BOI serve?

BOI reporting has been made mandatory for many companies in the US. Information about beneficial ownership must be submitted to FinCEN, a bureau of the US Department of the Treasury.

Making it a requirement for companies to report Beneficial Ownership Information is part of the US government’s efforts to improve the transparency of companies. With this information, FinCEN will also be able to more easily combat challenges such as bad actors concealing ill-gotten gains in shell companies or other complex and opaque ownership structures.

Some of the illicit activities that the US government aims to address with the BOI reporting process include money laundering, fraud, and other financial crimes.

 

Who has to report?

A wide variety of domestic (local) and foreign (overseas) companies are required to report Beneficial Ownership Information to FinCEN.

If you operate in the US and are a corporation (e.g. C or S corporations), limited liability company (LLC), or any other entity created by filing a document with a Secretary of State or similar office in the United States, you are required to file a BOI report.

For foreign-based companies (including corporations and LLCs), you must report BOI if you have registered to do business in the US by filing a document with a Secretary of State or similar office in the United States.

Who is exempt from reporting BOI?

FinCEN has identified 23 entities that are exempt from reporting BOI.

Some companies exempt from reporting Beneficial Ownership information include banks, credit unions, investment companies, accounting firms, and tax-exempt companies.

For the full list, check out FinCEN’s list of FAQs.

 

Do sole proprietors need to report Beneficial Ownership Information?

No, sole proprietorships do not need to report Beneficial Ownership Information unless they were created in the US by filing a document with a Secretary of State or similar office.

 

What information is required under BOI?

All companies that are required to report their Beneficial Ownership Information have to provide the following information:

  • Legal name of the company
  • Any trade names
  • Street address of the company’s principal place of business in the US
  • Its jurisdiction of formation or registration
  • Taxpayer identification number
  • Information about each individual who is a beneficial owner
    • The person’s name
    • Date of birth
    • Residential address
    • An identifying number from an acceptable identification document (e.g. passport or US driver’s license)
    • Image of the identification document as supporting evidence

 

Companies must make an initial BOI report and any changes must be subsequently updated or corrected as needed. Currently, there is no requirement to report BOI every year after the initial submission if there are no changes.

 

What are the deadlines for reporting Beneficial Ownership Information?

The BOI reporting rule takes effect on January 1, 2024.

Companies formed before January 1, 2024 will have until January 1, 2025 to report Beneficial Ownership Information.

Companies formed between January 1, 2024 and January 1, 2025 will have 90 days from the date of formation to file the initial report of Beneficial Ownership Information.

Companies formed after January 1, 2025 are given 30 days from the date of formation to file the initial report of Beneficial Ownership Information.

 

How much does it cost to report BOI?

Reporting Beneficial Ownership Information is free of charge. It can be done directly on the FinCEN website starting January 1, 2024. More information about how to file the BOI report will be made available when reporting starts on January 1, 2024.

 

What happens if you do not report or are late to report?

FinCEN takes a strict stance on companies that fail to report Beneficial Ownership Information by the deadline and civil or criminal penalties may apply. 

You may incur $500 of civil penalties for each additional day past the deadline that you do not file this information, as well as criminal penalties of up to 2 years and/or a fine of up to $10,000. Senior officers of the company may be held liable for this offense.

 

Do you need an attorney or CPA to make the report?

No, you do not. FinCEN expects that most, if not all, companies that are required to file their BOI report will be able to do so without enlisting the help or assistance of a lawyer or accountant.

 

Where can you get more details about Beneficial Ownership Information reporting?

For more information about BOI reporting, check out the dedicated FinCEN website. You can subscribe for regular updates as new information is released, and also use the chat feature if you have specific questions.

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Nacondra Moran

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