Beneficial Ownership Report: A Guide to Filing

Following a ruling by a federal district court in Texas, the enforcement of the Corporate Transparency Act (CTA) and beneficial ownership information (BOI) reporting requirements are suspended as of Dec. 3, 2024. While businesses have no current obligation to file BOI reports, they may consider preparing them as a precautionary measure.

This is a developing situation, and the federal government filed an appeal. As a result, we strongly suggest monitoring for any new updates.

Small business owners have a lot on their plates—and now they have one more thing to do: File a beneficial ownership report. 

Understanding beneficial ownership information reporting

A beneficial ownership report (BOI) is a report that is filed with a federal agency, and it discloses the identities of individuals who own or control a company. The idea is to promote corporate transparency and prevent illegal activities. This report is relatively new, so it’s important to understand what a BOI is, how it works, and whether it might apply to you.

Key components of beneficial ownership reports

A beneficial ownership report includes several key components. As you move through the online form, you will be asked to fill out these sections:

• Filing type: Indicates whether the report is an initial filing, correction, or update.
• Company information: Includes the name, address, jurisdiction of formation, and tax ID number for the business.
• Company applicants: For initial BOI reports, include information about the person who filed the registration documents to form the business. This could be a lawyer or a certified public accountant (CPA), or it could be the business owner.
• Beneficial ownership information: Includes the name, address, birth date, and identifying document (like a license or passport) for each beneficial owner.

Legal framework 

This legislation has been discussed at several agencies for the past few years.

Corporate Transparency Act overview

The Corporate Transparency Act (CTA) was enacted in 2021 as part of the Anti-Money Laundering Act. It requests U.S. corporations, LLCs, and similar entities to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The goal of the CTA is to combat money laundering and terrorism financing and promote corporate transparency.

Role of the Financial Crimes Enforcement Network (FinCEN)

FinCEN is the government agency that collects, maintains, and secures beneficial ownership information. BOI reports go to FinCEN, which will host the BOI database. 

Beneficial ownership filing requests and process

FinCEN estimates that in the first year alone, more than 32 million businesses could report beneficial ownership information. Will you be one of them? All business owners should learn more about the process.

What businesses should consider a beneficial ownership report?

Not all business entities need to file. Note that one of the most common exemptions is for nonprofits that have tax-exempt status. Sole proprietorships and general partnerships don't need to file because they aren't business entities that require registration with the state government.

Who is a beneficial owner?

A beneficial owner is an individual who owns 25% or more of a company’s equity, controls significant decisions, or holds substantial control over the business. What is “substantial control”? According to FinCEN guidance, someone is considered a beneficial owner if they:

• Are a senior officer, like a president, chief financial officer, general counsel, chief executive officer, or chief operating officer.
• Have the authority to appoint or remove the company’s officers, directors, or similar individuals.
• Direct, determine, or influence decisions about the company’s business, finances, or structure.

FinCEN also includes a “catch-all” provision including individuals with “any other form of control … exercised in new and unique ways.” It can all get a little confusing, so if you’re still wondering, “When is beneficial ownership information needed?” it’s best to consult a professional, like an attorney or a CPA.

Step-by-step BOI filing guide

Once you determine whether you’re a reporting company and who your beneficial owners are, you’re ready to start thinking about filing your beneficial ownership report:

• Gather information. Collect the details you’ll need about each beneficial owner, including full name, date of birth, residential address, and unique identification number.
• Access the reporting system. Go to FinCEN’s beneficial ownership information reporting page. You’ll have the option to download a PDF that you can submit later or to submit your BOI report using the online form.  
• Fill out the report. Complete the beneficial ownership report form. Enter details accurately, including company information and each beneficial owner's details.
• Attach identification documents. Upload copies of the identification documents for each beneficial owner to verify their identity.
• Review and submit. Double-check all entered information for accuracy and completeness to avoid any errors. Submit the completed report through the FinCEN portal.
• Save your confirmation. Keep a copy of the confirmation and submitted report for your records. You might need it in the future.
• Update as needed. If you made a mistake or ownership information changes, you may update the report within 30 days by logging back into the FinCEN portal and filing a correction or update form.

Tips for collecting and verifying information

BOI reporting can seem like a hassle, especially if your business has a lot of stakeholders. Use these tips for collecting beneficial ownership information and making sure it’s accurate: 

• Use a standardized form. Develop a clear, standardized form for beneficial owners to complete so you can collect information consistently.
• Send follow-up requests. Send reminders through different communication channels.
• Cross-check with public records. Once you receive information, compare it against public records and databases to make sure it’s accurate.
• Document your efforts. Keep detailed records of all attempts to contact beneficial owners and gather and verify information.

Impact on small businesses and startups

Large operating companies are generally exempt from beneficial ownership reporting. That’s because they’re already subject to substantial regulatory oversight and transparency through other channels, such as public financial disclosures and corporate governance practices. However, the request to provide information can have a big effect on small businesses and startups:

• Administrative burden. Gathering, verifying, and reporting ownership information requires time and resources, potentially diverting attention from core business activities.
• Privacy concerns: Owners may have concerns about disclosing sensitive information.

While smaller businesses may face challenges, beneficial ownership reporting promotes transparency, which can build trust with investors, customers, and partners.

Overcoming the challenges of BOI registration

Filing a beneficial ownership interest report can be a challenging task for limited liability companies and other small businesses. Legal language can be complex. That’s why we offer personalized BOIR support from our specialists. Just answer a few questions about your beneficial owners, and we’ll prepare and file your report.

FAQs

What is a beneficial ownership report?

A beneficial ownership report is a document detailing the individuals who have substantial control over a company, providing transparency in company ownership.

How do I get a beneficial owner report?

You can obtain a beneficial owner report by collecting the information from the beneficial owners and submitting the appropriate forms to FinCEN.

Where do I get a beneficial ownership form?

Beneficial ownership forms can be obtained from the Financial Crimes Enforcement Network (FinCEN) website, through your company's compliance officer, or through our services.

Who is exempt from beneficial ownership reporting?

Certain entities, such as publicly traded companies and large operating companies, may be exempt from filing a beneficial ownership report.

What information is in a beneficial ownership report?

The report requests details about the beneficial owners, such as name, address, date of birth, and identifying numbers (e.g., driver’s license or passport number).

How does beneficial ownership reporting help combat money laundering?

It increases corporate transparency and helps authorities track and prevent illicit activities like money laundering and terrorist financing.

What should I do if my beneficial ownership information changes?

If there are changes in a company's beneficial ownership information, the reporting company should update and submit the new information to FinCEN.