What is BOI reporting?

Beneficial Ownership Information (BOI) reporting is designed to collect and disclose information about the true owners behind businesses, helping to prevent fraud, promote transparency, and safeguard the financial system against money laundering and other illicit activities.

Who do you file BOI reports to?

You file BOI reports to the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of the Treasury. Companies submit their BOI reports electronically through FinCEN's online filing system. The reports are confidential and not publicly accessible, but they can be accessed by law enforcement and financial regulators for authorized purposes.

What is FinCEN?

FinCEN—Financial Crimes Enforcement Network—is a U.S. government bureau focused on detecting and preventing financial crimes like money laundering. Managed by the U.S. Department of the Treasury, FinCEN works both within the U.S. and internationally to stop illegal financial activities for national security.

Moreover, FinCEN uses data from required reports submitted by financial institutions to:

• Monitor suspicious transactions that might indicate money laundering or other criminal actions.
• Identify high-risk individuals and their financial activities to prevent misuse of the financial system.

History of BOI reporting

Here's a brief history of Beneficial Ownership Information (BOI) reporting:
‍

Pre-2016:

• Limited transparency about company ownership.
• Criminals could hide behind complicated corporate structures easily.
• Minimal requirements for disclosing true business owners.
  ‍

2016:

• Initial discussions about increasing corporate transparency.
• Growing international pressure to combat money laundering.
  ‍

2021:

• Corporate Transparency Act passed in the United States.
• Landmark legislation requiring detailed ownership reporting.
  ‍

January 1, 2024:

• Official implementation of BOI reporting requirement.
• Companies are required to start filing beneficial ownership reports with FinCEN.

What is a beneficial owner?

A beneficial owner:

1. possesses (directly or indirectly) at least 25% or more of the ownership interests in the company OR
2. Has substantial control over the company's decisions, management, and operations. 
   ‍

Specifically, this can include:

‍

‍

What does substantial ownership mean?

Substantial ownership means having a significant level of control or a considerable stake in a company. For BOI reporting, a beneficial owner with substantial ownership usually meets one or more of the following criteria:

• Any individual who owns or controls at least 25% of the company's equity interests. This includes shares, membership interests, or other types of ownership stakes.
• Individuals with substantial control over a company’s operations, financial decisions, or policies also meet the criteria for substantial ownership. This includes roles such as:some text
  • Senior officers or executives (e.g., CEO, president, CFO) who make significant company decisions.
  • Individuals who can appoint or remove senior managers or have a controlling influence over company operations.
• Individuals may also qualify if they indirectly control the company, such as through another entity or trust they control that has substantial ownership.

Who has to file a BOI report?

Generally, the following types of companies are required to file a BOI report:

• Corporations and Limited Liability Companies (LLCs) formed in the U.S. or registered to do business in the U.S. must file if they don’t meet any exemptions (such as having substantial operations, being publicly traded, or being regulated under federal securities laws).

• Other legal entities created through a filing with a U.S. state, such as limited partnerships (LPs) and business trusts, are generally required to file BOI reports unless they meet exemption criteria.

• Foreign entities registered to do business in the U.S. (such as foreign LLCs or corporations operating in the country) must also file BOI reports, provided they do not qualify for exemptions.

Who is exempt from BOI reporting?

Here are the types of businesses that are exempt from filing a BOI report:

‍

‍

What's in a BOI report?

A BOI report provides FinCEN with key details about your company and its owners. This information includes all the BOI reporting requirements such as: 

Information about your company

• Legal name and other business names (doing business as or d/b/a names).
• Primary business address.
• Jurisdiction of formation (the state or country where your business is legally established).
• Taxpayer Identification Number (TIN).

Details about beneficial owners

• Full legal name.
• Date of birth.
• Residential address.
• Identification number from an official ID, such as a U.S. driver’s license, state ID, or passport. A foreign passport may be used if none of these U.S.-issued documents are available.
• Image of the identification document.

Information about company applicants

If your business was created on or after January 1, 2024, you’ll also need to report information about the company applicants—the individuals who formed or registered the company. For each applicant, you’ll provide the same type of additional information as for beneficial owners: name, birthdate, address, ID number, and an image of the identification document.

How to file a BOI report

Filing a BOI report is now mandatory under the Corporate Transparency Act (CTA) for many businesses, and it guarantees transparency in company ownership. If your business falls under the requirement, here’s a step-by-step guide to help you prepare and file your report with the FinCEN:

Step 1: Check if your business needs to file

Under the CTA, corporations and LLCs must file BOI reports unless they qualify for an exemption. Some common exemptions include:

• Large operating companies: Companies with over 20 U.S.-based full-time employees and over $5 million in U.S. revenue.
• Inactive entities: Entities established on or before January 1, 2020, are no longer active.
• Nonprofits: Except those awaiting IRS approval for nonprofit status.

If your business doesn’t fall into these categories, consult a legal professional to confirm if you must file.

Step 2: Identify the beneficial owners

Beneficial owners own or control at least 25% of your company or exercise significant control over it. Once you identify these owners, notify them that you must report their details to FinCEN. Beneficial owners can submit their information to you or get a FinCEN Identifier (a unique ID that allows them to provide information directly to FinCEN).

Step 3: Establish a procedure

Set up a process to collect, store, and update beneficial owner information. Since you’ll need to keep this information current, having a well-organized system is essential for future updates and compliance.

Step 4: File your report online

FinCEN requires all BOI reports to be filed online. You can choose one of the following methods for BOI e-filing:

• Upload a completed PDF: Download the BOI reporting form as a PDF, fill it out, and upload it on FinCEN’s website.
• Use FinCEN’s online platform: You can also complete the form directly within FinCEN’s online system.

Filing deadlines

• Companies established before January 1, 2024: File by January 1, 2025.
• Companies established between January 1, 2024, and January 1, 2025: File within 90 days of formation.
• Companies established on or after January 1, 2025: File within 30 days of formation.

Remember that any beneficial ownership or personal information changes must be reported within 30 calendar days to remain compliant. These steps will help confirm that your BOI report is filed accurately within the reporting deadline. 

What happens if you fail to file?

Failing to file a BOI Report can result in civil penalties such as:

• You may face fines of $500 per day, up to $10,000.
• You could also face up to two years in prison.

Additionally, if any details in your BOI report change — such as a new beneficial owner or an update to an address or identification number — you must submit an updated report within 30 days of the change. If not, the penalties include:

• A $500-per-day fine, up to $250,000.
• Up to five years in prison.

FAQs about contingent employment

What is BOI reporting?

Beneficial Ownership Information (BOI) reporting involves disclosing information about individuals who directly or indirectly own or control a company. This information is essential for assessing who a business is partnering with, making sure that engagements align with the company’s risk tolerance, and identifying potential risks.

Who needs to file a BOI in 2024?

In 2024, BOI filing is required for:

• Corporations, LLCs, and entities created through official filings with state offices in the U.S.
• Entities formed under foreign laws but registered to conduct business in the U.S.

Some entities are exempt, including publicly traded companies meeting specific criteria, certain nonprofits, and large operating companies.

What is the purpose of BOI?

BOI aims to prevent illicit activities by preventing anonymity in business ownership. Financial institutions use BOI data for due diligence, while governments and businesses rely on it for risk management, compliance with sanctions, and avoiding connections with money laundering or fraud.

Is BOI mandatory?

Yes, BOI reporting is mandatory under the Corporate Transparency Act (CTA) for entities that qualify as "reporting companies" unless exempt. Failure to comply can lead to penalties, including fines up to $10,000, daily fines of $500, and up to two years of imprisonment. Unauthorized disclosure of BOI data can also lead to significant penalties, including a $250,000 fine and up to five years in prison.

Does a single-member LLC need to file a BOIR?

Yes, single-member LLCs must file a Beneficial Ownership Information Report (BOIR) with FinCEN as part of the Corporate Transparency Act requirements. As a single member, you're considered both a beneficial owner (meeting the 25% ownership threshold) and an individual with substantial control over the company. 

Wrap up

Accurate and timely BOI filing can help small business owners, as well as LLCs and LPs avoid money laundering issues and criminal penalties and stay compliant with government regulations. But understanding whether you need to file a BOI or if your business falls under the exempt category is an important decision to take.

For instance, if you’re a service provider, you may not have to file a BOI report. So carefully read about the FinCEN beneficial ownership requirements and then decide! 

Pia Mikhael is a guest contributor. The views expressed are theirs and do not necessarily reflect the views of Rho.

Rho is a fintech company, not a bank. Checking and card services provided by Webster Bank, N.A., member FDIC; savings account services provided by American Deposit Management, LLC, and its partner banks.

Note: This content is for informational purposes only. It doesn't necessarily reflect the views of Rho and should not be construed as legal, tax, benefits, financial, accounting, or other advice. If you need specific advice for your business, please consult with an expert, as rules and regulations change regularly.