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Beneficial Ownership Information Reporting Rule: Ultimate Guide

Beneficial Ownership Information

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As a small business owner, there are many freedoms you can enjoy that you never did as a regular 9-to-5 employee. However, the caveat is you’re subject to different types of paperwork, and in some cases, more of it, which can create additional stress and work.

For example, as of January 1, 2024, the Beneficial Ownership Information Reporting Rule (also known as the Reporting Rule) has come into effect. If you’ve never heard of it, then it’s time to get educated.

Does this affect and/or apply to your business, and what should you know about this new rule? Read on to find out.

 

What Is the Beneficial Ownership Information Reporting Rule?

The Beneficial Ownership Information Reporting Rule first came about on September 30, 2022. However, it didn’t come into full effect until January 1, 2024.

The Reporting Rule requires that certain companies report to the US Department of the Treasury’s Financial Crimes Enforcement Network, or FinCEN. Basically, if you’re registered to do business in the US, you’ll have to inform FinCEN about your company’s beneficial ownership.

In the Code of Federal Regulations (CFR), you can find the Reporting Rule in Title 31 in Section 1010.380.

 

Why Has This Rule Come About?

The Reporting Rule is part of a larger picture: the Corporate Transparency Act (CTA), which was part of the National Defense Authorization Act for Fiscal Year 2021. More specifically, it addresses Section 6403 of this act. It was passed in 2021 as an effort to fight money laundering, tax fraud, and other illicit activities.

 As the name implies, the CTA’s main goal is to improve corporate transparency and to address issues related to anonymous shell companies. The Reporting Rule is intended to make it more difficult for people to hide their ownership behind anonymous structures. It also enhances the ability of law enforcement and regulatory agencies to track and investigate financial crimes.

 

Who Needs to File Beneficial Ownership Information Reports?

All “reporting companies” have to file BOI reports; they can be either domestic or foreign, and this includes Tribal jurisdiction as well. Also, these companies include corporations and limited liability companies (LLCs).

Do note that there are some exceptions. Your company may be exempt if it’s any of the following entities:

  1. Securities reporting issuer
  2. Governmental authority
  3. Bank
  4. Credit union
  5. Depository institution holding company
  6. Money services business
  7. Broker or dealer in securities
  8. Securities exchange or clearing agency
  9. Other Exchange Act registered entity
  10. An investment company or investment adviser
  11. Venture capital fund adviser
  12. Insurance company
  13. State-licensed insurance producer
  14. Commodity Exchange Act registered entity
  15. Accounting firm
  16. Public utility
  17. Financial market utility
  18. Pooled investment vehicle
  19. Tax-exempt entity
  20. Entity assisting a tax-exempt entity
  21. Large operating company
  22. Subsidiary of certain exempt entities
  23. Inactive entity

 

In addition, this regulation doesn’t apply to large operating companies. This means that if you have more than 20 full-time American employees, you may not have to submit a BOI report. Addition requirements you must fulfill include having a physical US address and a federal income tax report that shows you have under $5 million in gross receipts or sales (not including foreign sources).

Should your company previously be exempt, but no longer qualifies, you’ll have 30 calendar days to file a BOI report after the exemption ends.

 

When Do You Need to File Your BOI Report?

After reading the above section, you might’ve realized that your business needs to file a BOI report. The Reporting Rule came into effect on January 1, 2024, but what does that mean for filing? The deadline will depend on when your company was created or registered:

  • Before January 1, 2024: January 1, 2025
  • Between January 1, 2024 and January 1, 2025: 90 calendar days after your company’s successfully formed
  • After January 1, 2025: 30 calendar days after your company’s successfully formed

If you fail to meet the deadline that applies to your company, then you may be subject to civil or criminal penalties; senior officers will be held responsible. For example, you may be fined $500 for each day of the violation, or even go to jail for up to two years. In addition, if you purposely submit false information, you may be subject to the same consequences.

On top of that, anyone involved in causing a company to not file may be held responsible. This also applies if they’ve caused the company to submit incomplete or false information.

 

Terms to Know

Before you get started on filing a Beneficial Ownership Information report, there are some key terms you should know and understand. That way, it’ll be easier to identify the beneficial owners in your business.

Below, we’ll discuss in detail what “beneficial owner,” “substantial control,” and other terms mean.

Beneficial Owner

According to FinCEN, a beneficial owner is someone who, “directly or indirectly exercises substantial control over a reporting company.” It can also be someone who owns or controls at least 25% of the ownership interests.

It’s possible to have more than one beneficial owner of a business. In fact, FinCEN says there’s no maximum number you can report.

On the other hand, there are exemptions for beneficial owners. FinCEN says there are five exceptions:

  1. Minor child
  2. Nominee, intermediary, custodian, or agent
  3. Employee who’s not a senior officer
  4. Inheritor
  5. Creditor

Substantial Control

FinCEN gives four general criteria for determining whether someone has substantial control.

The first is if someone’s a senior officer. This means they hold titles such as the following:

  • President
  • Chief executive officer (CEO)
  • Chief operating officer (COO)
  • Chief financial officer (CFO)
  • General counsel (GC)

The second is if someone has the authority to appoint or remove senior officers. This also applies if they can appoint or remove a majority of the board of directors (or something similar).

The third is if they’re an important decision-maker. In general, this means they have the ability to influence decisions regarding the company’s business, finances, and structure.

Lastly, if a person has any other form of substantial control, then they’ll fall under this category as well. You may need to evaluate whether someone has a new and/or unique way of control over the company.

Ownership Interest

As we’ve said earlier, someone is a beneficial owner if they own or control at least 25% of the ownership interests. But what does this consist of?

Ownership interest can be:

  • Equity
  • Stock
  • Voting rights
  • Capital/profit interest
  • Convertible instruments
  • Options

If someone can establish ownership in any other way, this may be considered as a type of ownership interest. In addition to instruments, contracts, and arrangements, simple understandings and relationships may indicate ownership too. 

Company Applicants

A company applicant is someone who directly files to create the business. It can also be someone who directs or controls this action.

Do note that a company applicant must be an individual; it can’t be an entity or company. Plus, you can only report one or two applicants, nothing more.

When filing your BOI report, you may have to report your company applicants too. Domestic companies created on or after January 1, 2024 will have to do so, as well foreign companies that have first registered to do business in the US in the same timeframe.

 

Special Reporting Rules

Not every case is straightforward, but thankfully, the Reporting Rule names four special reporting rules that dictate what you should do. Read on for each specific case.

1. Owned by Exempt Entity

Normally, you’d report the individuals who have ownership interest. However, if the company is owned by an exempt entity, you can put the entity down instead.

2. Minor Child

A minor child doesn’t have to be reported as a beneficial owner, as long as you provide information on their parent or legal guardian instead. Just make sure you make note of this on your BOI report. Do note that you will have to report the minor child as a beneficial owner once they reach the age of majority.

3. Foreign Pooled Investment Vehicle

In a foreign pooled investment vehicle, you don’t need to report any company applicants. However, you’ll have to report one person who has substantial control. If there’s more than one person that this applies to, pick the person who has the most authority.

4. Company Applicant Reporting for Existing Companies

Companies created or registered before January 1, 2024 won’t need to report company applicants. Just make note of when your company was created/registered.

 

How to File a BOI Report

The good news about filing is it’s all done online; there’s no physical paperwork to deal with. You’ll use FinCEN’s secure filing system to submit your company’s report. Also, there’s no fee for doing so.

If you’re concerned about data security, rest easy knowing that all BOI data is stored on FinCEN’s Beneficial Ownership Secure System (BOSS). It’s non-public, so only limited parties will have access to what’s stored inside.

Before you proceed, know that there are three options on FinCEN’s site: PDF, web, and system-to-system API. 

You’ll need Adobe Reader if you opt for the first choice. However, you can prepare your report offline, which means you won’t have to complete it in one go. In addition, if you need to make updates or corrections, you won’t have to start all over again.

Using the system-to-system API allows you to automate the filing process. But you won’t be able to file immediately, as you’ll need to contact FinCEN for this information. Therefore, we don’t suggest this route if you have time constraints.

The information you’ll need to have on hand for your report are:

  • Full legal names (of your company, beneficial owner(s), and company applicant(s))
  • Company’s trade name
  • Dates of birth (beneficial owner(s) and company applicant(s))
  • Complete current addresses (of your company, beneficial owner(s), and company applicant(s))
  • Identification numbers (Taxpayer Identification Number (TIN), Employer Identification Number (EIN), Social Security Number (SSN), driver’s license number, etc.)

The following are the sections you must fill out when making your BOI report through the web option.

Filing Information

Here, the form will autofill the date that the form was prepared. You’ll check one of the following for type of filing:

  • Initial report
  • Correct prior report
  • Update prior report
  • Newly exempt entity

Reporting Company Information

In this section, you’ll fill out the reporting company’s legal name and the DBA, if applicable. Additional information you’ll need include:

  • Tax identification type
  • Tax identification number
  • Country/jurisdiction of formation
  • Current US address

Company Applicant(s) Information

The company applicant will then need to provide their legal name and date of birth, address, and identifying document. You’ll have to upload an image of the identifying document too.

Beneficial Owner(s) Information

This section is identical to the previous one, but the key distinction is that you’re filling out details for the beneficial owner(s). If you’re not clear on the difference between company applicants and beneficial owners, we’d suggest going over the previous sections detailing each term.

Submit

Finally, you’ll fill out your email and first and last names. Then, you’ll check a certification box before sending the form off to FinCEN.

 

What if You Need to Amend Your Beneficial Ownership Information Report?

If circumstances have changed, then you must file an updated BOI report within 30 days. The exception is if a company applicant’s personal information has changed.

If you realize that you’ve submitted inaccurate information, you won’t be subject to penalties if you correct these errors within 90 days of the deadline.

To amend your BOI report, use FinCEN’s secure online filing system. 

 

Consider Requesting a FinCEN Identifier

A FinCEN identifier is similar to an SSN or EIN; it’s a unique number assigned to either an individual or a reporting company. You can only request it after you’ve provided certain information to FinCEN, but it’s not mandatory that you do so. However, the main advantage of having this number is it cuts out some work, as you can use it in place of some fields on the BOI report.

To receive a FinCEN identifier as an individual, you must provide your:

  • Name
  • Date of birth
  • Address
  • Unique identifying number and issuing jurisdiction
  • Image of your ID

To receive a FinCEN identifier as a reporting company, simply check the appropriate box on your BOI report.

 

Let Business Anywhere File for You

As a busy small business owner, you may not have the time or energy to understand Beneficial Ownership Information reporting requirements. But it’s something that has to be done.

If you want to avoid a huge headache, then use Business Anywhere’s BOI filing service. We’ve taken the time to understand all the nuances, which eliminates the hard work on your part, and we’ll be your company applicant. With how affordable our services are, it’ll be worth every penny to save time and have peace of mind.

 

Make Sure You Submit Your Beneficial Ownership Information Report

The Beneficial Ownership Information Reporting Rule has only recently come into play. And while it’s true that some companies are exempt from filing a BOI report, you have to act fast to determine if you’re one of them.


If not, then ensure you meet the deadline by relying on Business Anywhere. With our quick and competitively-priced services, you’ll have your report submitted within a few business days.

Sign up for an account with Business Anywhere today. We’ve got other handy services that’ll make your life easier.

About Author

Rick Mak

Rick Mak

Rick Mak is a 30-year veteran businessman, having started, bought, and/or sold more than a dozen companies. He has bachelor's degrees in International Business, Finance, and Economics, with masters in both Entrepreneurship and International Law. He has spoken at hundreds of conferences around the world during his career on entrepreneurship, international tax law, asset protection, and company structure. Business Anywhere Editorial Guidelines

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