Since January 1st, 2024, a new reporting requirement has been enacted for US and foreign entities conducting business in the United States. This is the BOI reporting.

Not providing the required information on time or reporting false or incorrect information may result in hefty fines and even prison.

Latest update

At the time of writing, the status of BOI filing requirements is uncertain due to a recent court order that temporarily suspends the mandate. The Department of the Treasury is appealing this decision. In the meantime, reporting companies are not required to file. However, businesses formed before January 1st, 2024, are advised to file by December 31st, 2024, to ensure compliance if the requirements are reinstated.

You can find more details on the FinCEN website.

BOI reporting

BOI stands for Beneficial Ownership Information. Section 6403 of the Corporate Transparency Act (CTA) enacted this new report to enhance corporate transparency in the US. Although some exceptions are available, most small businesses are subject to this requirement.

BOI reporting is a disclosure report, not a tax form. Therefore, it is submitted directly through FinCEN, the Financial Crimes Enforcement Network of the Department of the Treasury.

BOI reporting companies

This new FinCEN BOI reporting requirement applies to US domestic and foreign entities:

  • Domestic Entities: Entities formed with any states within the United States.
  • Foreign Entities: Entities formed outside the United States but registered to do business there.

All the aforementioned entities existing by January 1st, 2024, are subject to this requirement even if they were to be dissolved now. This means this new requirement applies to most small businesses, though some exceptions are available.

All the aforementioned entities existing by January 1st, 2024, are subject to this requirement even if they were to be dissolved now. This means this new requirement applies to most small businesses, though some exceptions are available.

BOI reporting exemptions

Some entities are exempt from this new requirement because of their current substantial federal reporting obligations. Examples are banks, security brokers, registered investment advisors, insurance companies, and public companies.

Large operating companies are also exempt. To qualify, they generally should have more than 20 full-time employees, a physical office in the States, and over $5 million in sales from US sources.

Beneficial owners for BOI reporting

FinCEN has two definitions for Beneficial Owners:

  • Any individual who exercises substantial control over the reporting company directly or indirectly.
  • Any individual who owns or controls at least 25% of the capital.

What counts as substantial control?

Per the definitions above, substantial control becomes a key term for reporting appropriate information.

Individuals are considered to have substantial control over an entity if they qualify as important decision-makers. This means anyone who makes decisions that would significantly impact the company should be considered a beneficial owner. Common examples of this would be:

  • A senior officer/manager of the reporting company (President, CEO, CFO, General Counsel)
  • Someone with the authority to appoint and remove officers or directors
  • A decision-maker of the Reporting Company. These decisions should be related to structure, investments, and business.

You can find more info in the FinCEN Small Entity Compliance Guide.

Required information

This report requires the beneficial owners of a reportable entity to submit their personal information. It should include:

  • Name
  • Date of Birth
  • Home/Registered Address
  • Passport Photocopy

Unlike other reporting, you cannot use a registered agent or proxy information for the BOI disclosure.

Certain additional information may be required for some entities. For instance, US entities created on or after January 1st, 2024, and foreign entities registered to do business in the US on or after that date should also provide the information of their company applicants.

Company applicant for BOI reporting

Up to two individuals could only qualify as company applicants of an entity. The first company applicant would be the individual who directly filed the creation or first registration document for the reporting company with the secretary of state. If more than one individual were involved in that filing, the second potential company applicant would be the individual primarily responsible for directing or controlling the filing.

BOI report deadline

The due date for the BOI reporting depends on when the entity was incorporated:

  • Entities incorporated or formed before January 1st, 2024 must file before January 1st, 2025.
  • Entities incorporated in 2024 must file the report within 90 days of its incorporation.
  • Entities incorporated on or after January 1st, 2025, must file the report within 30 days from its incorporation.

If any previously reported information changes, reporting companies have 30 days to file an updated report with FinCEN.

Non-compliance with BOI reporting

Failing to file or intentionally reporting false information may trigger significant penalties such as:

  • A civil penalty of up to $500 for each day of non-compliance,
  • Criminal penalties of up to $10,000,
  • Even imprisonment for up to two years.

The report filer, the beneficial owner providing the information for the report, and the entity for which the report is being filed can all be held responsible for intentional non-compliance.

File your BOI report on time

This requirement is fulfilled through the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury and is an attempt to enhance corporate transparency in the US.

Besides the entity information, personal information for each beneficial owner is required. Penalties for providing false information or not filing are high. However, we can help you with this new filing requirement.

Reach out to your tax accountant or contact us.