Discover these essential BOI filing tasks every small business needs to stay compliant, avoid costly mistakes, and ensure accurate reporting.
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The beneficial ownership information (BOI) report is essential for small businesses, helping ensure transparency in business ownership to combat fraud and money laundering. BOI reports require certain business entities to disclose information about their beneficial owners — the individuals who have significant control or ownership within the business.
In this guide, we’ll walk you through each aspect of BOI reporting so you can understand the requirements and maintain compliance, ultimately safeguarding your business.
BOI requirements went into place as part of the Corporate Transparency Act (CTA). The requirements apply to LLCs or corporations that don’t have other reporting requirements. Business trusts, limited liability partnerships, and other business types that register with a Secretary of State (or similar office) usually need to file, too.
Businesses formed on or after January 1, 2024, must provide identifying information about their company applicants along with the beneficial owners in the beneficial ownership information (BOI) report.
This regulation targets smaller entities that would otherwise be more difficult for regulatory bodies to monitor.
The purpose of BOI reporting is to help prevent money laundering, fraud, and other financial crimes by clarifying who ultimately controls a business. It helps ensure that reporting companies, including small LLCs and corporations, comply with the new reporting requirements established by the Corporate Transparency Act, creating a layer of transparency for entities that might otherwise operate without close scrutiny.
Under the terms of the act, a “beneficial owner” is anyone who holds 25% or more of the business’s ownership interest or exercises significant control over the company.
A common misconception is that BOI filing applies only to larger corporations, leaving small businesses out of the regulatory spotlight. However, even small businesses can present risks to financial systems if ownership is unclear. A domestic reporting company (DRC) is a business entity created by filing documents with the state’s Secretary of State or similar office.
Another misconception is that BOI reporting is the same as tax reporting. While both types of reports require some accurate ownership information, BOI focuses on transparency, not revenue or tax details.
Small business owners should be clear on these distinctions to avoid confusion during filing.
The types of businesses that must file a BOI report include limited liability companies (LLCs), corporations, and limited partnerships. As a reporting company, these entities are often small, privately held, and, therefore, subject to beneficial ownership reporting regulations, unless they qualify for one of the CTA’s exemptions. Here’s a closer look at which types of small businesses must file and the exemptions that might apply.
LLCs and Corporations: Most small LLCs and corporations fall within BOI reporting requirements due to their private ownership structures. Reporting companies created or registered in the U.S. must report beneficial ownership information to FinCEN starting January 1, 2024.
Limited Partnerships and Trusts: While less common, certain trusts and limited partnerships must also report beneficial owners if they meet specific control thresholds.
Not all small businesses are required to file a BOI report. The following entities are generally exempt from filing a BOI report:
Collecting a company’s beneficial ownership information is critical to BOI compliance. Before filing, you’ll need to gather all necessary details about each beneficial owner. Here’s an overview of the information you’ll need and tips for ensuring accuracy.
BOI reporting requires specific details about each person who qualifies as a beneficial owner, including:
Maintaining accuracy in these details is key, as even minor errors could lead to compliance issues or penalties. Double-check this information with relevant documents, and ensure the owners are informed about the privacy protections surrounding this data.
BOI filing is designed to be straightforward, but understanding each step can make the process smoother. The filing method you choose will depend on your business’s access to technology, preference for paper or digital records, and the filing deadlines. One of the business admins must tackle the beneficial ownership information reporting process to ensure accurate and timely reporting. Here’s a detailed step-by-step guide to BOI filing.
Ensure you have every beneficial owner’s legal name, address, date of birth, ID, and ownership percentage to report ownership information to FinCEN. Cross-reference these details against government IDs and other documents for accuracy.
BOI filing can typically be done electronically or on paper. No matter which BOI form you file, each method has benefits and limitations:
Once completed, submit your BOI report. Filing deadlines vary based on your business registration date, so be sure to check the specific due date for your business. Reporting companies formed between specific dates must file their reports within a set number of days after receiving actual or public notice from the Secretary of State. Late submissions may incur fines, so prioritize on-time filing.
Missing a BOI filing deadline to report beneficial ownership information can lead to compliance issues and possible fines. Businesses should mark their calendars and establish reminders for reporting deadlines, as they can vary annually.
The BOI filing requirement went into effect on January 1, 2024. Businesses that were created before that date have until January 1, 2025 to file. Businesses created during the 2024 calendar year need to file within 90 days of their formation. Finally, businesses that start on or after January 1, 2025 will have 30 days to file their BOI report.
If a company’s beneficial owner information changes, then they’ll have just 30 days to report an update to their information.
Failing to file a BOI report can have severe civil and criminal penalties.
While BOI filing requirements are clear, small business owners may encounter challenges. For starters, determining who qualifies as a beneficial owner can be complex if you’ve never done it before. Typically, beneficial owners are individuals with at least a 25% ownership stake or significant control. Entities that are either created or registered to do business must report beneficial ownership information. If you’re unsure about certain stakeholders, consulting legal guidance can provide clarity.
Avoiding errors is another crucial hurdle to overcome. Common errors include incorrect addresses or misspelled names; even these simple problems can lead to penalties. Take time to double-check each owner’s information before submission. Tools like digital verification software can help reduce errors while also saving time on data entry.
Failing to file a BOI report can incur criminal and civil penalties. The criminal penalties can be pretty severe, maxing out at two years’ imprisonment and a fine of $10,000 for willful failure to file. Civil penalties can include fees of up to $500 per day of violation (adjusted for inflation).
That said, there is a potential grace period: according to FinCEN, if you file within 90 days past the due date, you may avoid penalties. Ultimately, it’s best to file on time and avoid these issues altogether. Proactive compliance can save you from a lot of headaches.
Several tools and services are available to simplify BOI reporting. ZenBusiness offers a beneficial ownership filing service that can streamline the process, helping ensure accuracy and compliance with FinCEN requirements. Filing services like ours can help keep your filings on track.
If you have ongoing relationships with a business attorney or legal consultant, they also can help you comply with these requirements.
Before submitting your BOI report, run through this final checklist to confirm that your form complies with FinCEN requirements:
With proper preparation and attention to detail, BOI reporting can be a straightforward process that enhances business transparency. By staying compliant, your small business can avoid penalties, maintain good standing, and continue growing with confidence.
Yes, many small businesses are required to file a BOI report. This reporting requirement applies to entities like LLCs, corporations, and limited liability partnerships. BOI filing ensures that these businesses disclose their beneficial owners, contributing to transparency and helping regulatory agencies prevent fraud and financial crimes.
BOI, or beneficial ownership information, is a report that requires small businesses to disclose key information about individuals who own or control a significant portion of the business. The BOI lists details like owners’ names, addresses, dates of birth, and ownership percentages, helping ensure that those who influence the business are publicly accountable.
Certain businesses are exempt from BOI reporting, typically those that are already heavily regulated or publicly accountable. For example, publicly traded companies, banks, and nonprofits usually do not need to file a BOI report, as they are subject to other federal and state oversight and reporting requirements. It’s important to confirm exemption status to avoid potential compliance issues.
If you operate a small business like an LLC or corporation that doesn’t already report to an organization like FinCEN or the SEC, you’ll probably need to file a BOI. Other business types like limited liability partnerships, certain trusts, or other businesses that were registered with the Secretary of State (or a similar office) usually need to file as well.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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