What Is a BOI Report and Why Do You Need to File Beneficial Ownership Information?

If you’re a business owner in the US, you might be wondering about the new BOI reporting requirements. But what exactly is the BOI Report, and why does it matter for your LLC? Keep reading to learn about the filing requirements and benefits.

What is the Beneficial Ownership Information Report, and Why Was It Introduced?

The Beneficial Ownership Information (BOI) Report is a compliance requirement introduced under the Corporate Transparency Act (CTA) to improve transparency and accountability among US-based business entities.

Starting in 2024, the Financial Crimes Enforcement Network (FinCEN) mandates certain reporting companies—including limited liability companies (LLCs) and corporations—to disclose their beneficial ownership information.

This initiative is designed to prevent the misuse of shell companies for illicit activities like money laundering and tax evasion by requiring disclosure of who truly holds substantial control over the company.

Key Benefits and Goals of the BOI Report

1. Transparency and Accountability: By requiring reporting companies to report beneficial ownership information, the BOI report makes it harder to use business structures as a cover for illicit activities.
2. Enhanced Compliance: US-based limited liability companies and foreign reporting companies registered to do business in the US are now obligated to disclose ownership, with severe civil and criminal penalties for those failing to file or willfully concealing information.
3. Legal and Financial Implications: Companies created or registered by January 1, 2025, and those with substantial control over such entities, should be diligent in filing, as non-compliance could lead to fines up to $591 per day for late reports.

Who Needs to File a Beneficial Ownership Information Report, and What Are the Filing Requirements?

If you own an LLC or similar reporting company in the US, you must submit a beneficial ownership information report to FinCEN. Nearly all domestic reporting companies and foreign reporting companies must file, disclosing beneficial owners who have substantial control over the reporting company.

Filing Requirements and Exemptions

• LLCs and Corporations Must Report: US-based reporting companies created or registered by January 1, 2024, must submit the BOI report. Entities registered on or after that date have 30 calendar days to file.
• Exemptions: Certain entities, such as large operating companies with more than 20 employees or publicly traded companies, are exempt from filing.
• Deadlines and Notices: Companies have 30 days from receiving notice that their registration becomes effective. Updates to ownership must be filed within 90 days of any change.

Further Reading: Explore FinCEN Beneficial Ownership Information Reporting Guidelines

How to File the Beneficial Ownership Information Report for an LLC

Filing the initial BOI report with FinCEN involves compiling and submitting specific information on each beneficial owner. The process ensures transparency for businesses and makes it harder for illicit shell companies to operate without due diligence.

Step-by-Step Filing Process

1. Collect Beneficial Ownership Information: Gather complete information, including the name, address, and passport or other identification numbers of each beneficial owner and those with substantial control.
2. File a Report via FinCEN Website: Submit your BOI report electronically through FinCEN’s portal, ensuring all information is accurate and up-to-date.
3. Update Timely: Changes in ownership or control must be reported within 30 calendar days to FinCEN.

What Are the BOI Reporting Obligations and Penalties for Non-Compliance?

If your company is required to report its beneficial ownership information to FinCEN, it’s essential to understand the BOI reporting obligations and the penalties for non-compliance. Missing these requirements or submitting inaccurate details can be costly, and FinCEN enforces these rules strictly. Below, we’ll break down the potential penalties and some compliance tips.

Understanding the Penalties

• Financial Penalties: Failing to file a BOI report or reporting incorrect information can lead to fines of up to $591 per day. For businesses, even simple errors can result in daily penalties that add up quickly, impacting your finances.
• Legal Risks: Deliberately concealing ownership or failing to file required information could trigger criminal penalties. If your company is found to be intentionally withholding or misreporting beneficial ownership data, it could face criminal charges, which may include fines or further action.

Best Practices for Compliance

• File the Initial BOI Report: Whether registered before January 1 or on or after January 1, 2024, most entities are required to file their initial BOI report within 30 days of their creation or registration effective date. Confirm any additional requirements with the Secretary of State or similar office.
• Keep Information Updated: Changes in beneficial ownership, especially if they meet the following criteria (such as a change in the senior officer or someone who exercises substantial control), must be updated with FinCEN within 90 calendar days. Regular updates ensure you’re compliant and help you avoid unnecessary fines.
• Understand Exemptions and Requirements: Certain businesses, like nonprofits or inactive businesses, may be exempt from BOI filing requirements. But, verify with the Department of State or FinCEN to confirm if your company is indeed exempt.
• Double-Check Your Information: Errors can lead to penalties just as much as missing a deadline. Ensure all information, including data on each company’s beneficial owner and anyone with authority to appoint senior officers, is accurate.

Further Reading: Avoid penalties for filing taxes late with the IRS

When Should Your Business File Its Initial BOI Report?

For any new or existing business entities required to disclose beneficial ownership information under the Corporate Transparency Act (CTA), understanding the timing of your initial BOI report filing is essential. Missing these deadlines or making errors can lead to penalties. Here’s what you need to know about timing and requirements.

What Triggers the Need to File an Initial BOI Report?

If your business was created or registered to operate in the US on or after January 1, 2024, you’re required to file its initial BOI report with the Financial Crimes Enforcement Network (FinCEN) within 30 calendar days of the business’s creation or registration effective date. For entities created prior to this date, reports must be filed by the end of 2024.

Your BOI report needs to provide specific information about beneficial owners who have directly or indirectly significant control over the company, such as senior officers or anyone with substantial control over company operations. Even legitimate businesses must comply to avoid penalties, which can reach up to $ 591 per day for non-compliance.

What Should You Do When You Receive Actual or Public Notice to Report?

If you receive actual or public notice from FinCEN or another similar office indicating that BOI reporting obligations apply to your business, you are required to report this information within 30 days of receiving the notice. It’s vital to respond promptly and ensure all beneficial owner data is current to avoid unnecessary fines.

What Are the Reporting Requirements if Information Changes?

After filing, any information changes involving beneficial owners or control structure (such as new officers with authority to appoint or others who exercise substantial control) must be updated within 90 calendar days. Failing to update information changes in a timely manner could mean penalties similar to those for failing to file the initial BOI report.

To stay compliant, make it a regular practice to review your previous year’s tax return and reported information to verify that your BOI report accurately reflects your current ownership structure and reporting obligations.

Key Takeaways

• New Requirement: The BOI report is a new mandate for LLCs.
• Filing Obligation: LLCs must report information on their creation or registration.
• Deadline Based on Start Date: Businesses before January 1, 2024, must report, while those registered on or after January file upon creation.
• Penalties for Non-Compliance: Failure to report may face criminal penalties.
• Annual Updates: Information must be reported on the previous year's activity.

How can Taxfyle help?

Finding an accountant to file taxes is a big decision. Luckily, you don't have to handle the search on your own.

At Taxfyle, we connect you with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will file your file taxes for you.