Businesses small and large are required to file a new type of report with the U.S. federal government in 2024. Called the Beneficial Ownership Information report (or BOI for short), this report discloses the owners of a business.

Here’s what you need to know about this new report:

• Most businesses will need to file the Beneficial Ownership Information report with the Financial Crimes Enforcement Network (FinCEN) between January 1, 2024 and January 1, 2025.

• Businesses could face civil penalties of $500 per day if the BOI report is filed late, and criminal penalties of up to $10,000 for willfully failing to file.

• Business owners need to remain vigilant for any changes due to time constraints. BOI reports must be updated within 30 days of any change. Businesses will be required to file an updated BOI report if any information changes – such as a change of address, or adding or removing owners.

Start reducing your chance of penalties by acting now to understand the requirements and collect the information you’ll need for your business’s beneficial ownership reporting.

TABLE OF CONTENTS

What is BOI?

At its core, the Beneficial Ownership Information report is all about disclosing the owners of a business entity to the federal government.

This report is filed with the FinCEN, which is a division of the U.S. Treasury Department.

Do I need to file a BOI report for my business?

The general rule is, if you filed documents with the secretary of state when establishing your business, you may need to file the Beneficial Ownership Information Report, too. But let’s jump into examples of entities that may not need to file!

Now, there are limited exceptions to the filing requirements for BOI.

Here are some entities that may not need to file a report:

• Sole proprietors doing business under their own name (without a corporation or LLC)

• General partnerships (that didn’t file with the secretary of state)

• Larger businesses and non-profit organizations (more on that below)

• Highly regulated industries (more on that below, too)

Here’s more on the “large operating company” exemption – your business must meet all of the following criteria:

• Your business has over $5 million in gross revenue, as reported on the previous year’s tax return.

• Even after subtracting out any foreign-source revenue, your business still has more than $5 million in gross revenue.

• Your business has over 20 full-time employees who are employed in the U.S.

• Your business has a physical office in the U.S.

And here’s more on the “non-profit exemption” – your organization must meet one or more of the following criteria:

• An organization that received IRS approval for tax-exempt status under Internal Revenue Code section 501(c).

• A political organization that is tax-exempt under section 527(a).

• An organization is a trust under section 4947(a).

For highly regulated industries, here are the types of businesses that will need to consult guidance from FinCEN to determine their BOI filing requirements:

• Publicly traded businesses

• Governmental authorities created by federal, state, or tribal governments

• Banks and credit unions

• Money transmitters

• Securities brokers and dealers

• Investment companies and advisors

• Venture capital fund advisers

• Insurance companies

• Insurance producers

• Commodities brokers and dealers

• Public accounting firms

• Public utility companies

• Pooled investment vehicles

• Inactive businesses

When does my BOI report need to be filed?

Let’s break it into three categories, based on when your business was founded.

1. Business entities that were already formed or incorporated before January 1, 2024:

• Need to file an initial BOI report between January 1, 2024, and January 1, 2025.
• Need to file an updated BOI report within 30 days after any change occurs.

2. Business entities that form or incorporate on or after January 1, 2024:

• Need to file an initial BOI report within 90 days after receiving notice that their business entity was created or registered at the state level.
• Need to file an updated BOI report within 30 days after any change occurs.

3. Business entities that form or incorporate on or after January 1, 2025:

• Need to file an initial BOI report within 30 days after receiving notice that their business entity was created or registered at the state level.
• Need to file an updated BOI report within 30 days after any change occurs.

Which owners need to be disclosed on the BOI report?

On the BOI report, you will need to disclose each beneficial owner of the entity.

Beneficial owners are people who own or control at least 25% of the ownership interests of a business entity. This also includes people who exercise substantial control over a business (even if they don’t own 25% or more of the business).

This means that the following people need to be disclosed on a BOI report:

• Shareholders of a corporation, if they own 25% or more

• Partners in a partnership, if they own 25% or more

• Members in a limited liability company (LLC), if they own 25% or more

• Key employees who exert substantial control over a business entity, even if they don’t own 25% or more.

Doesn’t the government already have this information?

Not at the federal level.

State governments sometimes ask for a list of the owners of a business, and tax returns sometimes list the owners of a business. But the federal government has not had a centralized database of business owners, which is why they’re now requiring this beneficial ownership reporting.

Congress decided that the federal government needs a centralized database of business owners as a tool for investigating financial crimes. Congress mandated the Beneficial Ownership Information report as part of the Corporate Transparency Act of 2021.

And with FinCEN administering the BOI report program, they’re sending a clear signal that this reporting will be used to crack down on financial crimes.

What penalties could I face if my BOI report is not filed by January 1, 2025?

There are two levels of penalties you could face: criminal and civil.

The maximum criminal penalty is $10,000 for willfully failing to file the Beneficial Ownership Information report. You could also face up to two years imprisonment.

Civil penalties start at $500 per day if the initial BOI report is filed after the January 1, 2025 due date.

What can you do to avoid these penalties? Adopt a risk management mindset! Eliminate the risk of late penalties by taking steps now to ensure that your BOI report is filed in time.

What information needs to be disclosed on my BOI report?

While the form itself is not yet publicly available, FinCEN has revealed what types of information is needed to complete your Beneficial Ownership Information report.

Businesses will need to disclose information such as…

For the business entity itself:

• Full name of the entity

• Employer Identification Number

• The state or jurisdiction where the entity was incorporated or formed

• Full street address 

For each beneficial owner:

• Full legal name

• Full residential street address

• Date of birth

• Picture of government-issued identification (such as a passport or driver’s license)

In addition, there are special disclosure rules for entities that are newly created in 2024 and on. These entities will need to disclose the individual(s) who filed the incorporation paperwork with the secretary of state.

What kind of change requires an updated BOI report?

Let’s take a deeper dive into the information requirements.

The Beneficial Ownership Information report asks for the name and address of the business entity, and it asks for the name, address and a few other details for each beneficial owner.

If any of this information changes, an updated BOI report needs to be filed with FinCEN, within 30 days of the change occurring.

You should take immediate action to update your business’s BOI report if any of the following changes occur:

• Your business entity changes its name or address.

• Your business entity registers a new fictitious business name – also known as Doing Business As (DBA).

• Any shareholder or partner or member acquires new shares and now meets or exceeds 25% ownership.

• Any shareholder, partner or member retires.

• Any shareholder, partner or member dies.

• Any shareholder, partner or member changes their name (i.e. they got married or divorced, and this resulted in a name change).

• Any shareholder, partner or member changes their residential address.

• Any shareholder, partner or member changes their taxpayer identification number.

• Any shareholder, partner or member obtains a new driver’s license or identification document that includes a different name, or address, or identifying number.

What should I do now to get ready for the BOI filing requirements?

Start gathering the documents and information you need to file your initial Beneficial Ownership Information report.

Here are some of our recommended to-dos:

1. Review your list of owners and key employees.

2. Make sure you have the full legal name, residential street address, taxpayer identification number, date of birth, and a picture of a government-issued identification for each owner and key employee.

3. Review your by-laws or operating agreements, and consult with an attorney. You should ask your attorney if the by-laws or operating agreements need to add language that requires shareholders, partners, and members to provide the business with the required information. This ensures a complete and accurate BOI report filing.

4. Decide who will prepare and file your BOI report.

How can I remain vigilant about changes to my BOI?

For starters, we recommend creating a monthly process to review your Beneficial Ownership Information report, checking in with your partners, shareholders, and members. That way, you can identify any changes to the reported details.

We also recommend working with a tax professional! Since beneficial ownership reporting is a new requirement for many businesses, working with an expert can ensure accuracy and timely filing.