What Beneficial Ownership Information reporting means to small business owners.

There is a new reporting requirement that small business owners need to know about. As of January 1, 2024 tens of millions of small businesses will need to file a beneficial ownership information (BOI) report with a branch of the U.S. Department of Treasury called the Financial Crimes Enforcement Network (better known as FinCEN). A failure to comply can result in a company and the individuals responsible for the non-compliance being subject to hefty civil and criminal fines and even possible jail time.

If you haven’t heard about BOI reporting yet, or heard about it but don’t know the details, please keep reading. We’ll provide you with some of the facts you need to figure out if you need to file a BOI report, and if so, what that means for your small business and the people who own or control it. This information is taken from the federal law that mandates the filing of this report (the Corporate Transparency Act), the official Rule written by FinCEN, and some of the statements made by FinCEN about BOI reporting.

Does my small business have to file this report?

If you formed a corporation (S corp or C corp) or a limited liability company (LLC), a BOI report will have to be filed unless your corporation or LLC qualifies for an exemption (more on exemptions later). Corporations and LLCs are the only business entity types specifically referred to in the Rule. However, entities other than corporations and LLCs may also have to file. The key is whether you had to file a document with the secretary of state or a similar office to create your company. And while not addressed in the Rule, FinCEN has commented that it believes sole proprietorships and most general partnerships would not have to file a report because they do not require the filing of a formation document.

There are 23 exemptions allowed by the Corporate Transparency Act. If your corporation or LLC has more than 20 full-time employees, more than $5 million in gross receipts, and an operating presence at a physical office in the USA, it can qualify for an exemption granted to what is called a “large operating company”. Certain types of inactive entities that were in existence on or before January 1, 2020 are also exempt.

Related: Take our Beneficial Ownership Information quiz to determine if filing may be required.

Many of the other exemptions are for entities already regulated by the federal or state government and many already have to disclose their beneficial ownership information to the government. These include, among others, publicly traded companies, financial institutions, insurance companies, public accounting firms, tax exempt organizations, and regulated public utilities. Most small corporations and LLCs will probably not qualify for an exemption but it’s still important to be familiar with all 23 because you’ll want to know for certain whether your company is exempt or not.

Related article: The 23 exemptions from the Corporate Transparency Act’s beneficial ownership information reporting requirement

When, where, and how do I file this BOI report?

If you currently own a small business that has to file a BOI report (in which case your small business is called a “reporting company”), that report will have to be filed sometime between January 1, 2024 to January 1, 2025. Reporting companies formed on or after January 1, 2024 and before January 1, 2025 have to file within 90 days of receiving actual or public notice of their formation. Reporting companies formed on or after January 1, 2025 have to file within 30 days of receiving actual or public notice of their formation.

Your company’s BOI report will be filed with FinCEN. It will be submitted electronically through a filing system that will be located on FinCEN’s website. There is no fee for filing the report. Note that this is a federal filing. There is no state filing involved. 

What information will I have to report to FinCEN?

The BOI report for your company will provide FinCEN with certain facts about the company – namely, its legal name and any d/b/a names it conducts business under, its address, jurisdiction of formation, and taxpayer identification number.

And what will probably be more important to you as an owner of a reporting company is that you will also have to provide FinCEN with personally identifiable information (that is, information from which an individual can be identified) for each beneficial owner.  A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company or who owns or controls at least 25 percent of a reporting company.

For each beneficial owner of your company, you’ll have to provide the individual’s legal name, birthdate, home address, an identifying number from a driver’s license, state ID, or passport, and an image of the document that the number is from. (Reporting companies formed on or after January 1, 2024 will also provide information about their company applicants.)

Related article: Beneficial Ownership Information reporting – What information is required?

What happens if the information I reported changes or I realize it was inaccurate when the report was filed?

If any of the information reported about the company or any of its beneficial owners changes, or there is a change in who the beneficial owners are, an updated report has to be filed with FinCEN within 30 days of the change. If there was an inaccurate statement in the BOI report filed for your company, a corrected report has to be filed within 30 days of when you became aware of, or should have become aware of, the inaccuracy.