Beneficial Ownership Information Reporting
Not sure what your responsibilities are for the new beneficial ownership information report? Legacy Tax & Resolution Services can help.
- Ensure compliance with this new federal mandate
- Securely submit your information with expert guidance
- Stay in compliance with automated reminders
This reporting mandate begins January 1, 2024! It is estimated that 97% of businesses may be required to file!
I Heard I Did Not Have To Comply- WRONG! DON'T FIND OUT THE HARD WAY
On March 1, 2024, a federal district court held that the Corporate Transparency Act (CTA) is unconstitutional. The court only enjoined enforcement with respect anyone involved in the case, so the CTA continues to apply for all other companies. The decision is being appealed, but that process will take several years.
Self-Application for FinCEN Identifiers
Entities and individuals applying for a FinCEN identifier, which simplifies amendments to BOI reports, must complete the application process themselves. Neither attorneys nor third-party entities can do this on behalf of a company, as the login information must align with the details provided for the FinCEN identifier.
No Current Option to Cancel FinCEN Identifiers
Once assigned, the FinCEN identifier cannot currently be canceled or terminated. This may lead to ongoing update requirements, even when the identifier is obsolete. FinCEN has been asked to address this quandary, but the timeline and certainty of any resolution are unclear.
Persistent Uncertainties in Some CTA Requirements
Identifying a reporting company’s “beneficial owners” under the CTA’s definition can be a very challenging task. An individual with “substantial control” over a company falls under this definition, yet the regulations lack clear-cut criteria for determining substantial control. As such, determining substantial control can be a highly fact-specific and subjective undertaking. Therefore, companies should seek legal counsel for precise evaluations regarding substantial control and beneficial ownership.
Additional ambiguity persists around whether subsidiaries of exempt entities qualify for exemption. The applicable CTA provisions look to control and ownership factors that have been subject to conflicting interpretations by lawyers and other commentators.
Physical Office Requirement for Filing BOI Reports
To comply with the CTA, companies must report their BOI and indicate a physical office address as their principal place of business in the United States. The use of post office boxes or registered agent addresses for this purpose is not permissible. The acceptability of a virtual office address remains uncertain, and while the use of a residential address seems viable and often the only address available given the trending shift to remote work, FinCEN has yet to provide explicit confirmation in this regard.
There have been requests to FinCEN to provide clarity on this requirement because many newly formed entities may not secure a physical office before their filing deadlines. This issue is expected to become more pressing in 2025 when the filing deadline will be shortened to 30 days post-formation.
Service Providers Report Filing Backlogs
In the face of potential liability, many law firms are declining to file BOI reports on behalf of their clients. Companies are increasingly seeking BOI filing support from third-party service providers who traditionally handle document filing for business entities. Because FinCEN has not yet enabled a direct connection of the service company systems with FinCEN’s filing system, some service providers are reporting filing backlogs of two weeks or more as filing information has to be entered manually. Accordingly, companies that are required to file BOI reports should plan ahead and seek to file as early as possible. DO NOT wait till the deadline approaches to address your filing requirement, backlogs may leave your without availability at any of the providers.
Consequences of Failure to Comply
There is a lot at stake for the estimated 32.6 million corporations, LLCs and other entities that FinCEN expects will be impacted by the new beneficial ownership information (BOI) reporting requirements in the first year the CTA goes into effect, 2024. Non-exempt companies must file their reports timely or face civil and criminal penalties. Missed filings are subject to a penalty of $591 for each late day. Willfully failing to file a BOI Report or willfully providing false information on a BOI Report can result in a criminal fine of up to $10,000 and/or two years imprisonment. Penalties can apply to beneficial owners and/or to the officers of the company, depending on the type of violation.
Ready to File Your BOI Report?
In September of 2022, the Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the bipartisan Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) report. The rule will enhance the ability of government agencies to protect national security and financial systems from illicit use and help prevent drug traffickers, fraudsters, and other criminals from laundering or hiding money in the United States.
The new rule describes who must file a BOI report, what information must be reported, and when a report is due. Specifically, the rule requires Corporations and Limited Liability Companies to file reports that identify the beneficial owners of the entity and the company applicants of the entity.
Key BOI reporting dates to be aware of:
- FinCEN began accepting BOI reports on January 1, 2024
- New businesses that are formed on or after January 1, 2024, must file within 90 days of business formation
- Existing businesses that were formed before January 1, 2024, must file before January 1, 2025
- New businesses that are formed on or after January 1, 2025, must file within 30 days of business formation
Who Needs to File a BOI Report?
The rule identifies domestic and foreign as the two types of reporting companies that must file a report.
- A domestic reporting company is a Corporation, Limited Liability Company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
- A foreign reporting company is a Corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. Under the rule, and in keeping with the CTA, twenty-three types of entities are exempt from the definition of “reporting company.”
FinCEN expects that these definitions will also include Limited Liability Partnerships, Limited Liability Limited Partnerships, Business Trusts, and most limited Partnerships, because such entities are generally created by a filing with a secretary of state or similar office.
Newly-Formed Entities
For companies formed in 2024, the initial BOI Report is due within 90 days of formation. Beginning in 2025, the report for new entities will be due within 30 days of formation. In addition to the other requirements, newly-formed companies will also need to obtain and report information for up to two “company applicants” or those people who are directly responsible for forming the company with the state. This is typically the attorney and the corporate service provider who file the formation document with the state, and those individuals likely will provide you with a unique FinCEN ID number.
Changes in Ownership
Note, after the initial BOI Report, companies must also file an updated BOI Report for any changes to the information on the initial BOI Report, such as changes to the company’s name or address, or to the beneficial owners of the company. Changes requiring an updated BOI Report are discussed more fully at https://www.fincen.gov/boi.
Watch for States Enacting Legislation Similar to the CTA
Finally, as if deciphering and complying with the CTA were not enough for businesses to deal with, some states are now passing CTA-like legislation of their own. For example, on March 1, 2024, New York Governor Kathy Hochul signed into law the amended LLC Transparency Act, which will go into effect on January 1, 2026 and will require limited liability companies formed or doing business in New York to file reports disclosing their beneficial ownership information. According to the National Association of Secretaries of State, other jurisdictions, including the District of Columbia, collect ownership and control information regarding businesses either through their articles of incorporation/organization or through periodic reports that businesses must file in their jurisdiction. Only time will tell if more jurisdictions will pass their own CTA-like legislation. Whether more jurisdictions decide to do so may depend on how the CTA fares as more legal challenges to the statute and regulations are resolved. Moving forward, we will continue to monitor these developments and provide updates on new legislative developments.
Different Types of Reporting Entities
The rule defines “reporting companies” that must submit BOI reports. Reporting companies include:
Domestic Reporting Companies
Corporations
Limited liability companies (LLCs) Note: No distinction between Single Member LLC (SMLLC) and Multi-Member LLC (MMLLC)
Any entities created by filing formation documents with a secretary of state
This means many types of entities formed under state law will likely qualify, like:
Limited liability partnerships
Limited partnerships
Limited liability limited partnerships
Business trusts
Foreign Reporting Companies
This includes any foreign-formed entity that registers to do business in the U.S. by filing documents with a secretary of state, including:
Foreign corporations
Foreign LLCs
Who is exempt from the reporting rule?
FinCEN has identified 23 exemption categories. If an entity is in one of those categories and meets its specific exemption criteria, it does not have to submit a beneficial ownership report. The exemptions are primarily for entities already under close regulation by the federal and state governments.
- Securities reporting issuer
- Governmental authority
- Banks
- Credit unions
- Depository institutions holding company
- Money services business
- Broker or dealer in securities
- Securities exchange or clearing agencies
- Other Exchange Act registered entites
- Investment companies or investment advisers
- Venture capital fund advisers
- Insurance companies
- State-licensed insurance producers
- Commodity Exchange Act registered entities
- Public utilities
- Financial market utilities
- Pooled investment vehicles
- Tax-exempt entities
- Entity assisting a tax-exempt entities
- Large operating companies
- Subsidiary of certain exempt entities
- Inactive entities
- Public accounting firms registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212)
Simply falling into any of these categories does not automatically make a reporting company exempt. Each category has specific criteria that must be met to qualify for exemption. Refer to FinCEN’s Small Entity Compliance Guide for details.
Industries that Will Likely Need to Report
Most newly formed or registered companies in the following industries will likely qualify as reporting companies:
- Retail: Small and medium-sized retailers like boutiques, restaurants, or specialty stores formed as LLCs or corporations.
- Professional Services: Law firms, accounting practices (80% according to AICPA), consulting firms, and other service businesses organized as corporations or LLCs.
- Real Estate: Most newly formed real estate development, management, and investment companies.
- Construction: General contractors, subcontractors, and specialty trade contractors organized as limited partnerships or LLCs.
- Technology: Early-stage startups and app developers formed as LLCs or C-corps.
- Wholesale Trade: Distributors, importers, and exporters formed as limited partnerships, corporations, or LLCs.
Beneficial Owner Information Report FAQs
What is a beneficial ownership information report?
A beneficial ownership information (BOI) report provides the Financial Crimes Enforcement Network (FinCEN) with information about registered business entities, their beneficial owners (individuals with substantial control over or 25% or more ownership interest), and their company applicants.
How is the beneficial ownership information report connected to the Corporate Transparency Act?
BOI reporting is part of the responsibilities set forth by the Corporate Transparency Act (CTA), enacted in 2021, to establish uniform reporting requirements for business entities. By disclosing personal details about who owns or controls a company, the beneficial ownership report is meant to help identify and prevent illegal activity — such as tax fraud, money laundering, drug trafficking, and financing of terrorism.
Is every company required to file a BOI report?
Most registered business entities meet FinCEN’s definition of a “reporting company.” Reporting companies can be either domestic or foreign.
- Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or with any similar office under the law of a state or Indian tribe.
- Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
So, LLCs, C Corporations, S Corporations, and other types of corporations fit the definition. FinCEN doesn’t specifically mention them, but different entity types — such as Limited Partnerships, Limited Liability Partnerships, Limited Liability Limited Partnerships, and Business Trusts — might also be reporting companies.
Businesses, like Sole Proprietorships and General Partnerships, which do not register formation documents, do not have to file a beneficial ownership report.
When are beneficial ownership reports due?
FinCEN will begin accepting BOI reports on January 1, 2024. Deadlines depend on when a reporting company was created or registered.
- Reporting companies created or registered to do business before January 1, 2024 – Initial BOI report is due by January 1, 2025.
- Reporting companies created or registered on or after January 1, 2024 and before January 1, 2025 – Initial BOI report is due within 90 days of the entity’s formation.
- Reporting companies created or registered on or after January 1, 2025 – Initial BOI report is due within 30 days of the entity’s formation.
Who is a beneficial owner of a reporting company?
A reporting company’s beneficial owner is any individual who owns or controls 25% or more of the ownership interests of a reporting company or who directly or indirectly exercises substantial control over the entity.
Some types of individuals do not count as beneficial owners:
- An employee (not in a senior position) whose control or economic benefits from the reporting company are derived solely from their activities as an employee.
- An individual who has only a future ownership interest through a right of inheritance (once they inherit the interest, they must be reported)
- A custodian, nominee, intermediary, or agent of another individual who meets the beneficial owner definition
- A minor child (information about a parent or guardian must be reported instead)
- Creditors of the reporting company
What is considered an ownership interest?
Any individual who owns or controls at least 25% of the ownership interests in a reporting company is considered a beneficial owner.
An ownership interest may be any of the following:
- Equity
- Stock
- Capital or profit interest
- Voting rights
- Any instrument convertible into stock, equity, voting rights, or capital or profit interest
- Options or other non-binding privileges to buy or sell any of the interests mentioned above
- Any other contract, instrument, or mechanism to establish ownership
What does “substantial control” over a reporting company mean?
An individual has substantial control if they: 1) Are a senior officer (e.g., CEO, CFO, COO, or other executive level position with a high degree of authority); 2) Have the authority to appoint and remove senior officers and members of the board of directors or other governing body; or 3) Make, direct, or influence the company’s important decisions.
Important decisions could include those concerning things like reorganizations, mergers and acquisitions, making amendments to the company’s governance documents, adding or removing lines of business, expanding into different markets, determining senior officers’ compensation structures, dissolving the business, entering into contracts, and selling or leasing principal assets, etc.
What are some examples of substantial control?
Substantial control might be direct or indirect.
Examples of direct substantial control include:
- Serving on the reporting company’s board of directors
- Owning or controlling a majority of voting power or voting rights
- Having rights associated with financing or interest
Examples of indirect substantial control include:
- Controlling any intermediary entities that exercise substantial control over a reporting company
- Having financial or business relationships with other entities or individuals acting as nominees
Is there a limit to how many beneficial owners we have to report?
Reporting companies must identify ALL individuals who meet the definition of a beneficial owner and do not qualify as an exception to the reporting rule.
Who is a company applicant?
A company applicant is a person who physically or electronically files a business registration application with the state to form an LLC, Corporation, or other legal entity or who files an application to register a non-U.S. to conduct business in the United States.
If more than one individual is involved in the reporting company’s formation filing process, both the person who directly filed the formation document and the individual who helped direct or control the filing must be included in the BOI report.
Does every reporting company have to identify a company applicant?
No. Only domestic reporting companies created on or after January 1, 2024 and foreign reporting companies first registered to do business in the U.S. on or after January 1, 2024 must include their company applicants in their BOI report.
What details must we include about our company and its beneficial owners and company applicants?
Reporting companies must include the following information about their business entity:
- Legal name
- DBAs or trade names
- A principal business address in the U.S.
- Formation or registration jurisdiction (state, tribal, or foreign)
- Federal taxpayer ID number (TIN, Social Security Number, EIN)
The information they must provide about their beneficial owners and company applicants include:
- The individual’s full legal name
- Date of birth
- Residential street address (Company applicants may use the business address in some instances).
- Personal identification number and issuing jurisdiction from a non-expired U.S. passport, state driver’s license, or other ID document issued by a state, local government, or tribe — also an image of the ID document. (Individuals may use a foreign passport if they don’t have any other forms of ID.)
To streamline the report filing process, reporting companies, beneficial owners, and company applicants can obtain a FinCEN identifier, which eliminates the need to enter some of the specific details within the BOI report.
What is a FinCEN ID number?
A FinCEN identifier is a unique number assigned upon request to a reporting company, beneficial owner, or company applicant. Reporting companies can use FinCEN identifiers to simplify and streamline completing their BOI forms. No one is required to obtain a FinCEN identifier.
A reporting company can request one by checking the designated box on its BOI report. Individuals may request a FinCEN identifier through an electronic application.
How do I report my company’s beneficial ownership information?
You’ll file your BOI report through FinCEN’s secure filing system, which will be available starting January 1, 2024. From that date forward, you can find instructions and technical guidance in the BOI section of the FinCEN website.
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Our Process
Gather Beneficial Owner's Information
Answer a few simple questions about the individuals who own or control your business so your report is personalized and accurate.
We create and file the report for you
We’ll prepare a personalized report that satisfies the requirements of the federal reporting mandate, and we’ll file it for you.
Track Your Filing Status
Once we file your personalized report with the Financial Crimes Enforcement Network (FinCEN), we’ll provide confirmation.
Update or Correct Prior BOI Reports
Effortlessly generate and submit both Initial and Updated BOI Reports. If changes are needed, you can also file a Corrected BOI Report with Legacy Tax & Resolution Services.
Record Keeping
When it comes to your filing records, make sure to keep them safe. Legacy Tax & Resolution allows you to store and access all prior filings indefinitely.
FAQs- Beneficial Owner Information (BOI) Reporting