The Beneficial Ownership Information (BOI) reporting requirement was introduced as part of the Corporate Transparency Act (CTA), which was enacted on January 1, 2021. This regulation mandates that certain businesses in the United States must disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The reporting requirement is applicable to companies formed or registered after January 1, 2022. If your company existed prior to this date then you must comply by providing your beneficial ownership details within a specified timeframe. The BOI requirement was introduced to enhance transparency in corporate structures and combat illicit financial activities, like money laundering, fraud, and tax evasion. By ensuring that the true owners and controllers of businesses are identified and reported, the BOI aims to close loopholes that have historically been exploited for financial crimes.

Table of contents

Why is the BOI report important?...Read more

What is the definition of a beneficial owner?...Read more

Who needs to file a BOI in 2024?...Read more

What is a BOI report for an LLC?...Read more

Information required in the BOI report...Read more

How to file a BOI report?...Read more

Where to file the BOI report?...Read more

When is the BOI report due?...Read more

Benefits of filing the BOI report...Read more

Common questions about the BOI report...Read more

Why is the BOI report important?

The BOI report is crucial for a number of reasons: Transparency: The BOI report plays a vital role in unveiling the true ownership and control structure of a company. By providing clarity on who actually owns and controls a business, it builds trust among stakeholders, including investors, partners, and customers. Prevention of financial crimes: One of the primary purposes of the BOI report is to help authorities effectively track and prevent illicit financial activities. By accurately identifying beneficial owners, the report helps combat financial crimes. This proactive approach helps maintain the overall health of the financial system and protects businesses from becoming unwitting participants in illegal activities. Compliance: Following federal regulations is a critical aspect of business operations, and the BOI report is instrumental in ensuring compliance. By providing accurate and up-to-date information on beneficial ownership, businesses can avoid hefty fines, penalties, and legal complications. Enhanced corporate governance: The BOI report contributes to improved corporate governance by promoting accountability and oversight. It ensures that the individuals who truly control a company are recognized and held responsible for their actions. This level of accountability can lead to better decision-making processes, reduced risk of conflicts of interest and stronger overall management practices. Facilitating due diligence: The BOI report is a valuable tool for businesses involved in mergers, acquisitions, or partnerships. It provides potential partners with a clear understanding of the entire ownership structure, helping them make informed decisions. This transparency can speed up transactions and build confidence among all parties involved.

What is the definition of a beneficial owner?

A beneficial owner is someone who has direct or indirect significant control over a company that reports information or if they own or control at least 25% of the company. This could encompass:

Direct Ownership - Refers to individuals who hold ownership stakes in a company or asset directly in their name.
Indirect Ownership - Refers to individuals who control ownership through mechanisms like trusts or intermediary companies.

On the other hand, there are also a few categories of individuals who do not qualify as beneficial owners:

Infographic entitled Individuals who are not eligible for beneficial ownership.

Who needs to file a BOI in 2024?

Starting in 2024, the requirement to file a BOI report primarily applies to a wide range of legal entities, particularly those that are created by a filing with a state or tribal authority. The entities that need to file a BOI report include: Corporations: Most corporations formed in the US need to file, including C corporations, S corporations, and any other type of corporation. Limited Liability Companies (LLCs): All LLCsare required to file, including both single-member and multi-member LLCs. Limited Partnerships (LPs): If any one of the partners has a limited liability, then it is required to file. Limited Liability Partnerships (LLPs): Partnerships where some or all partners have limited liabilities. Other Legal Entities: Any other entities created by a filing with a state, including business trusts and certain foreign entities registered to do business in the US However, certain entities are exempt from the BOI reporting requirements, including: Large operating companies: Referred to companies that have more than 20 full-time employees, over $5 million in sales, and a physical office in the U.S. Certain regulated entities: Referred to banks, credit unions, securities brokers or dealers, investment companies, and insurance companies that are already subject to other regulations and reporting requirements. Inactive entities: Referred to entities that have been in existence for over a year, are not engaged in active business, and do not have foreign or domestic assets. The BOI report is filed with the Financial Crimes Enforcement Network (FinCEN) to help combat money laundering, terrorism financing and other illicit activities by increasing transparency of entity ownership. It is essential for entities to stay updated on these requirements to ensure compliance and avoid penalties.

What is a BOI report for an LLC?

BOI for LLCs involves a series of steps that ensure your business is legally recognized and compliant with state regulations. This process includes choosing a unique business name, filing the Articles of Organization, and creating an operating agreement that outlines the management structure and operational procedures.

Information required in the BOI report

Infographic entitled the information required for BOI reporting.

How to file a BOI report?

The process of filing the BOI report involves several simple steps: Collect information: Gather all the required information about every beneficial owner, making sure to gather accurate and comprehensive details. Fill out the form: Complete the BOI form 2024 PDF form, ensuring that all the information provided is accurate and complete. Submit to FinCen for BOI reporting: Finally, submit the completed form to FinCen electronically, following their submission guidelines.

Where to file the BOI report?

To file the BOI report, businesses need to access the FinCEN online filing system, where they can submit the required information regarding their beneficial owners. It's crucial to ensure accuracy and completeness when filing this report to avoid potential penalties and to remain compliant with federal regulations.

When is the BOI report due?

The deadlines for filing a BOI report depend on the specific circumstances of the reporting company: New companies: Newly formed or registered companies must file their BOI report within 30 days of their formation or registration. Existing companies: Companies already in existence before the implementation of the BOI reporting requirements must file their initial BOI report within a specific timeframe set by the regulatory authorities, typically within one year of the rules taking effect. Changes in information: If there are changes in the beneficial ownership information (like a change in ownership or control), the company must update its BOI report within 30 days of the change. You must note that if you fail to file on time, there may be penalties.

Benefits of filing the BOI report

Filing the BOI report has several benefits: Legal compliance: Ensures your business complies with federal regulations. Avoid penalties: Helps you avoid fines and penalties. Transparency: Provides a clear picture of ownership, building trust with stakeholders.

Common questions about the BOI report

Who has to file a BOI report?

Who is exempt from BOI reporting 2024?

What information is needed for the BOI report?

What happens if I don’t file the BOI report on time?

How often do I need to update the BOI report?

What is BOI compliance?

Do single members LLC need to file BOI?

Can beneficial ownership information be updated?

Do sole proprietors need to file the BOI report?

Most sole proprietors do not have to submit a BOI report. The BOI requirement mainly applies to certain corporations, LLCs, and similar entities formed by filing a document with a state or tribal authority. Since a sole proprietorship is not a separate legal entity and doesn’t require state-level formation documents, it is typically exempt from BOI reporting. However, it's always advisable for sole proprietors to stay informed about specific regulations and requirements that may apply to their business structure, as rules can vary and change over time. It is essential for any business entity to correctly understand and follow the reporting requirements outlined by the Board of Investments (BOI). By upholding transparency and strict compliance with federal regulations, businesses can shield themselves from legal complications and help foster a more transparent and trustworthy business environment. By following this guide, businesses can better understand the BOI report, ensuring compliance and transparency in their operations. FlyFin CPAs can also help you understand and report BOI accurately, as their AI-driven tools assist with all the groundwork required for tax filing, making the process more efficient.

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What is a BOI Report?