What Is Beneficial Ownership Information Reporting?

On Dec. 3, 2024, a federal district court in Texas issued a nationwide order temporarily blocking the enforcement of the Corporate Transparency Act (CTA) and its reporting requirements. As a result, businesses are not currently required to submit beneficial ownership information (BOI) reports.

Although reporting is not mandatory at this time, an appeal was filed by the federal government. Businesses may still consider gathering their ownership information in case the requirement is reinstated.

Given the significance of this ruling for most businesses, it’s highly recommended that you stay informed about further developments.

The Beneficial Ownership Information Report (BOIR) is a law set by the federal Corporate Transparency Act (CTA). The law went into effect Jan. 1, 2024, and is part of a national effort to prevent financial crimes. Affected limited liability companies and corporations are requested to report beneficial ownership information to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN).

Introduction to beneficial ownership information reporting

The Corporate Transparency Act requests certain domestic and foreign reporting companies to make a beneficial ownership report directly to the federal government under the FinCEN beneficial ownership final rule.

What is beneficial ownership?

As per FinCEN, beneficial owners are any individuals who fit at least one of the following criteria:

• Have 25% or more of the reporting company's ownership interest (through equity, stocks, voting rights, or profit interests).
• Exercise substantial control over the reporting company.

The term "substantial control" also has a specific meaning under the act. An individual exercises substantial control if they:

• Serve as a senior officer of the company (CEO, CFO, or general counsel).
• Have authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar governing body).
• Direct, determine, or have substantial influence over important decisions made by the company, such as the nature of the company's business, major expenditures, operating budgets, selection of business lines, compensation schemes, or the termination of significant contracts.

Importance of beneficial ownership reporting

Without transparency, criminals or politically exposed persons may try to disguise their ownership of assets through anonymous shell companies or other proxies. These serve to funnel money through illegal activities like money laundering or tax evasion.

BOI reporting helps law enforcement follow the money trail and curb tax evasion. Beneficial ownership information reporting can bolster financial market integrity by revealing conflicts of interest and preventing undisclosed influence over companies.

Beneficial ownership information for LLCs

If your LLC was created by filing articles of organization or a similar document, you may be classified as a reporting company. Let's look at what information is requested from LLCs reporting beneficial ownership information to the Department of Treasury.

Specific reporting details for LLCs

The beneficial ownership report includes the following information about your LLC:

• Its full legal name
• Any trade or doing business as (DBA) name(s)
• Its physical address (not a P.O. box, virtual mailing address, lawyer’s office, or registered agent’s address)
• Its federal tax identification number or employer identification number (EIN)
• The jurisdiction where LLC was created or registered.

In addition to the above information, the report provides several key pieces about the LLC's beneficial owners:

• Full legal name
• Date of birth
• Current street address
• Unique identifying number and issuing jurisdiction from an acceptable identification document (such as a driver's license or passport)
• A digital copy of the acceptable identification document

Limited liability companies should report any inaccuracies or updates to previously submitted beneficial ownership information. The following changes must be reported within 30 days of identifying the inaccuracy or the change occurring:

• Inaccurate information, like a spelling mistake
• Changes to any beneficial owners' legal name or address
• The addition or removal of beneficial owners
• A minor beneficial owner reaches the age of majority
• A beneficial owner's death

How to file a Beneficial Ownership Information Report

Here's how you can prepare and file your Beneficial Ownership Information Report.

Step-by-step filing guide

The BOIR requests important information that requires some prep work and information gathering. Follow these five steps for easy filing.

1. Identify beneficial owners of the company. List out any person(s) who owns 25% or more of your company or exercises substantial control over it. If you are unsure if an individual meets the beneficial owner definition, speak to a legal professional.
2. Gather important documents. As mentioned earlier, the BOIR requests information about the company, its beneficial owners, and in some cases, even company applicants (the person who filed the articles of organization with the state government). Ensure you have all the information, such as complete legal names, addresses, and government-ID numbers, ready for submission.
3. File online via FinCEN’s secure BOI e-filing website. The online form has four sections: Filing, reporting company, company applicant, and beneficial owners. Complete each section thoroughly. If your company has more than one beneficial owner, you can add the additional beneficial owner by clicking on the "add beneficial owner" icon.
4. Verify and submit the report. After you have completed the four sections, you'll need to verify your answers. The system will highlight any missing or incomplete information. Make those changes, run a spell-check, and hit "Submit."
5. Print confirmation. Download a submission confirmation for your records. Select the "Download Transcript" button, and you'll instantly get a PDF. Store this safely alongside your other company paperwork like articles of organization or certificate of good standing. 

Documentation for filing the beneficial ownership report

Here's a breakdown of all the documentation you need if you file the BOI report.

• Company's articles or organization or articles of incorporation
• DBA or trade name certificates
• Federal employer identification number (EIN)
• Beneficial owner's government identification document in the form of a driver's license or passport
• Company applicant's government issued-ID

Tip: Ensure the digital copies of government IDs are under 4MB and in a .jpg/.jpeg, .png, or .pdf format.

Understanding FinCEN's role in BOI reporting

The Financial Crimes Enforcement Network plays a critical role in the enforcement and effectiveness of the BOI reporting.

Overview 

The Department of the Treasury has created a beneficial ownership database (called BOSS) to record FinCEN beneficial ownership information. FinCEN's data can assist law enforcement agencies track down and mitigate financial crimes.

FinCEN may maintain each reporting company's beneficial ownership information for at least five years after the company terminates.

Who can access a reporting company's beneficial ownership information?

Getting access to information in BOSS is not easy. The beneficial ownership information access rules define who gets to see information, and how they may use it. As of fall 2024, FinCEN only provides access to government entities at the federal, state, local, and tribal levels—including law enforcement agencies—that might need access to the data during criminal cases such as money laundering.

The listed law enforcement agencies first need to enter into a memorandum of understanding (MOU) describing how the agency will protect the security and confidentiality of the shared information.

FinCEN anticipates providing access to beneficial ownership information directly to foreign entities and financial institutions by the spring of 2025. A small business lawyer can advise you on how to get information from BOSS.

FAQs about beneficial reporting

Who should file a BOI report in the United States?

Most business entities registered to do business in the U.S. are considered to be reporting companies. A reporting company could be further classified as domestic or foreign (formed in another country but also registered to conduct business in the U.S.). There are, however, some exceptions.

Are there any exemptions from BOI reporting?

There are some exemptions that would place individuals outside the scope of beneficial ownership. Some exemptions are based on the types of companies they control. For example, large operating companies and other entities, such as publicly traded companies, are not considered reporting companies under the FinCEN beneficial ownership rule. Also, sole proprietorships do not need to file the report since they are not business entities formed with the state government.

Small businesses that are a part of the National Small Business Association (NSBA) are also currently exempt from filing the BOIR. Find more detailed information about exempt entities in the FinCEN guide.

How do I file my Beneficial Ownership Information Report?

You can file directly using FinCEN's BOI e-filing website or choose to work with a professional BOIR filing service. If you wish to file the report yourself, set aside at least 1–2 hours for completing the document.

Do I have to file a new BOI report if I register my LLC in a new state?

You don't have to update or file a new BOI report if you register your LLC in a new state and the beneficial ownership information remains the same. Until such time as there are changes or corrections, your original BOIR is sufficient.

However, these rules could change. Therefore, it's best to consult an experienced tax or small business lawyer about your specific situation.

Danny Bradbury contributed to this article.