How to Complete Beneficial Ownership Information Reports
Completing a Beneficial Ownership Information (BOI) Report requires providing the names, addresses, and other personally identifiable information of a company’s beneficial owners and other significant individuals. The FinCEN BOI report also requires specific information about the reporting company, including the company name, principal business address and federal tax ID number.
8 Steps to Complete Beneficial Ownership Information Reports
Prepare to file your company’s FinCEN BOI report by following these steps:
Step 1.) List All of Your Entities
Make a list of any legal or business entities you may be involved with, including LLCs, corporations and limited partnerships. For each entity, be able identify the entity’s full legal name, federal tax ID number (EIN), and any DBAs or trade names that the entity uses.
Step 2.) Identify Beneficial Owners
List any individuals who own at least 25% of the business.
Step 3.) Identify Control Parties
List any individuals with substantial control over the company, including LLC managers, senior officers, executives, directors, and other key decision-makers.
Step 4.) Identify Company Applicants
Only new entities being formed in 2024 and thereafter need to identify the two individuals who are most responsible for having the entity formed.
Step 5.) Gather Personal Information
For each individual being reported, collect their full legal name, date of birth, and residential address.
Step 6.) Gather ID Documents
Secure and store images of passports, U.S. driver’s licenses, or state-issued government IDs from each individual you are reporting.
Step 7.) Fill Out the BOI Report and Submit to FinCEN
Submit the Beneficial Ownership Information report through FinCEN’s online filing system. You can hire a filing service company or an attorney to assist with submitting your BOI report.
Step 8.) Keep Beneficial Ownership Information Up to Date
Keep track of any changes in Beneficial Ownership Information. Submit all BOI Updated reports to FinCEN every time any information changes that was included in a previous report.
What Information Do You Need for BOI Reports?
A reporting company needs to provide the following information for each individual included in the BOI report:
- Full legal name
- Date of birth
- Current residential address
- A unique identifying number from a valid ID document, and
- An image of the ID document.
The following documents are considered to be valid ID documents for the purpose of completing BOI reports:
- U.S. driver’s licenses,
- U.S. and foreign passports, and
- U.S. state, local, or tribe-issued IDs.
Valid ID documents must not be expired. Submitting an expired ID document may be considered a reporting violation and could result in penalties.
Reporting Company Information
In addition to individual information, the BOI report also requires specific information about the reporting company itself. The reporting company information includes:
- The reporting company’s full legal name.
This is the full legal name of the reporting company as it appears on the company’s formation documents. Be sure to include the correct corporate ending (LLC, L.L.C., Inc., Corp., Co., LP, or some other ending). The corporate ending included in the BOI report needs to match identically with the one used on the state filing, including punctuation.
- Entity type
LLCs, corporations, limited partnerships, series LLCs and statutory business trusts are all required to complete BOI reports.
- Legal jurisdiction
For domestic entities, this is the U.S. state, territory or tribe where the entity is duly formed or incorporated. For foreign entities, this is the U.S. state or territory where the entity first registered to do business.
- Principal business address
The principal business address is where the company performs its business operations. It is where important company records are kept, or where senior management is primarily located.
This address must be a physical address and cannot be a P.O. box. The principal business address is not the company’s registered agent address.
- Federal tax ID number
The entity needs to provide a U.S. tax ID number issued by the IRS. In most cases, this will be an Employer Identification Number (EIN). However, some entities, like single-member LLCs, may use an Individual Tax Identification Number (ITIN) or a Social Security Number (SSN) if they do not have an EIN number.
- Any and all trade names or DBAs (Doing Business As)
Entities need to report any alternate names used for business or other purposes. This includes filed and unfiled trade names or DBAs. Domain names of websites used for business purposes may also be considered as trade names and should be included in the BOI report.
The Corporate Transparency Act requires that BOI reports submitted to FinCEN to be complete and accurate. It is important to look over all of the information carefully and check for inaccuracies or mistakes before submitting a BOI report.
Any false or incorrect information could be considered a reporting violation that would result in penalties. A reporting company needs to file a BOI Corrected report if any inaccurate information is found in the previous report.
What People Need to be Included in a BOI Report?
- New companies formed in 2024 or thereafter report beneficial owners, control parties, and company applicants.
- Companies in existence anytime before 2024 report beneficial owners and control parties. Existing companies do not report company applicants.
Beneficial Ownership Information reporting requirements differ depending on the entity’s official formation date. The formation date is the date on which the Secretary of State first made actual or public notice that the company was formed.
How to Find the Company Formation Date
The Secretary of State typically stamps the official formation date on the company’s formation document, whether it be a Certificate of Formation (LLC) or a Certificate of Incorporation (corporation). Some states refer to these documents as Articles of Organization (LLC) or Articles of Incorporation (corporation).
The company formation date can also be found online on the Secretary of State’s website.
BOI Tip: If a company’s formation document specifies a future effective date, do not use this date in the BOI report. Instead, record the company’s formation date as the earlier of two dates: the date when the filing office publicly records the filing or the date when the filing office officially approves the formation document.
New reporting companies formed or registered in the U.S. after January 1, 2024 need to report:
- Beneficial owners,
- Control parties, and
- Two company applicants.
Existing reporting companies formed or registered in the U.S. before January 1, 2024 need to report:
- Beneficial owners, and
- Control parties.
Existing companies that were formed before 2024 are not required to report their company applicants.
What is a Beneficial Owner?
Beneficial owners are individuals who own at least 25% of the ownership interest in a reporting company. Common examples of beneficial owners include:
- Members in an LLC, and
- Shareholders of a corporation.
Types of Beneficial Ownership Interests
Beneficial owners can have ownership interest in an entity either directly or indirectly. This includes ownership through subsidiaries. The following are a few of the types of interest count towards beneficial ownership:
- Equity, stock, or voting rights in a reporting company.
- Stock options and privileges, like puts, calls or other options to buy or sell equity.
- Convertible instruments, like convertible equity or voting rights.
- SAFEs, KISSs, and similar agreements.
- Future arrangements, like warrants or rights to buy or sell stock.
- Capital or profit interest.
- Future “waterfall” rights to future ownership, distributions or control.
BOI Tip: Special Purpose Entities will need to list any springing members, special members or independent directors when completing a BOI report.
Can an Entity be a Beneficial Owner?
A reporting company’s beneficial owners are natural persons, not business entities. If a legal entity, like an LLC or corporation, holds at least 25% of the ownership interest in a reporting company, then the real people behind the holding company will need to be reported.
Can a Trust be a Beneficial Owner?
Similarly, if a trust owns 25% or more of a reporting company, the natural persons representing the trust must be reported as beneficial owners. These individuals might include:
- All the trustees of the trust,
- The grantor if the trust is revocable,
- Trust protectors, and
- Any primary beneficiaries of the trust.
Beneficial Owner Exemptions for Individuals
Reporting companies do not need to report:
- Minor Children Under Age 18,
- Nominees, Intermediaries, Agents, or Custodians,
- Employees who are not senior officers or owners,
- Inheritors, and
- Business creditors.
The Corporate Transparency Act provides exemptions for certain types of individuals. These individuals do not need to be reported as beneficial owners despite their involvement in a reporting company:
(1) Minor Children Under Age 18
A minor child does not have to be reported as a beneficial owner in a reporting company. However, this exemption only applies if the child’s parent or legal guardian reports their own information in place of the minor child’s.
A minor child will need to be reported once they reach the legal age of maturity. The reporting company will need to file a BOI Updated report to include the individual as a beneficial owner.
(2) Nominees, Intermediaries, Custodian, or Agents
Individuals acting purely as intermediaries or agents of a reporting company are exempt and do not need to be reported as beneficial owners. Individuals covered under this exemption may include:
- Consultants or ordinary advisors, and
- Tax professionals.
BOI TIP: New reporting companies formed after January 1, 2024 should be careful not to confuse their company applicants as being exempt intermediaries. Company applicants include the individual who submitted the entity formation documents to the Secretary of State, and the individual most responsible for having the entity formed. New reporting companies need to include information for both of these individuals in their BOI report.
General employees of a reporting company, who are not senior officers or control parties, are exempt from reporting. According to FinCEN, employees are considered individuals “subject to the will and control of the employer in what and how they do work”, and “that the employer may discharge the individual from work.”
Note that “employees” does not include senior officers or executives. All senior officers must be reported as “control parties” in a company’s BOI report. For example, all Vice Presidents should be listed.
BOI Tip: When reporting companies choose to exclude certain key individuals from a BOI report, they should proceed with caution. It’s a best practice to maintain a record of the non-senior officers you exclude, along with the reasons for their exclusion. Document why you don’t consider these individuals as senior officers.
For instance, an individual might have some executive responsibilities but lacks the authority to control the budget, spend funds, access bank accounts, or influence the company’s future direction.
Individuals who stand to inherit a future ownership interest in a reporting company do not need to be reported as beneficial owners. However, this exemption no longer applies once the individual fully inherits the ownership interest.
Regulated business creditors are not considered beneficial owners and do not need to be included in a company’s BOI report. FinCEN’s definition of creditors are individuals whose sole interest in a reporting company is “for the payment of a predetermined sum of money, such as debt, a loan covenant, or some other similar right to receive payment”.
Creditors are exempt as long as their sole ownership interest in the reporting company is through debt interest. Reporting companies must list private lenders if these lenders can potentially foreclose on the business or gain control in other ways, such as through loan covenants.
What is a Control Party?
Control parties include all of the important-decision makers involved in a reporting company. “Control party” should be considered a catch-all term for a reporting company’s senior officers, managers, and anyone who has “substantial control” over the entity and its operations.
FinCEN considers individuals with any number of the following responsibilities as being a control party within a reporting company.
- Senior officers in the company, including:
(2) Chief Financial Officer (CFO),
(3) Chief Executive Officer (CEO),
(4) Chief Operating Officer (COO),
(5) General Counsel (GC),
Or any similar title.
- Authority to appoint or remove senior officers or board members,
- Anyone with influence over one of the following:
(1) Selling or transferring company assets,
(2) Reorganization, dissolution or merger of the company,
(3) Major expenditures, investments, equity issuances, or approval of operating budgets,
(4) Compensation plans and incentives programs for senior officers,
(5) Entering or terminating contracts,
(6) Amendments to company documents, including incorporation or formation documents, bylaws, or significant policies, and
(7) Other strategic business decisions.
Individuals with any number of these responsibilities in a reporting company will need to be included in the company’s FinCEN Beneficial Ownership report.
What is a Company Applicant?
Company applicants are the individuals who are most responsible for having a legal entity formed. New companies formed or registered in 2024 need to provide information about their company applicants. Each reporting company has two company applicants for purposes of BOI reporting:
Company Applicant (1) Responsible for Requesting Company Formation
Reporting companies formed after January 1, 2024 need to disclose the individual who directed or controlled the initial filing of the company’s formation documents in their BOI Initial report.
The first company applicant is the person ultimately responsible for requesting that the business entity be formed. This is whether they completed the formation process themselves, or through a third party service.
Company Applicant (2) Direct Filer of Company Formation Documents
Reporting companies formed after January 1, 2024 also need to disclose the individual who ultimately submitted the company’s formation documents to the Secretary of State’s office.
If a company used a third party incorporation service to file their formation documents, then the incorporation agent who handled the filing is the second company applicant.
What Companies Do Not Report Company Applicants?
Existing companies formed before January 1st, 2024 do not need to report company applicants. Entities formed after this date only need to include beneficial owners or control parties in their Beneficial Ownership Information reports.
How to Update BOI Reports:
FinCEN requires reporting companies to keep their Beneficial Ownership Information reports up to date at all times. A reporting company will need to submit a BOI Updated Report within 30 days if any information changes.
Changes in BOI that would require an BOI Updated Report include:
- A change in company ownership,
- A beneficial owner changes their residential address,
- A beneficial owner obtains a new driver’s license, passport, or ID document that has a different document number than as previously reported.
- The reporting company changes its corporate name,
- The reporting company registers a new trade name or DBA,
- The reporting company’s principal business address changes,
- A new senior officer, such as a new CEO, is appointed,
- And more.
BOI Tip: FinCEN’s current regulations do not require a company to file a BOI Update report if and when the entity is dissolved, canceled, terminated or is voided by the state.
How to Correct a BOI Report:
Information provided to FinCEN in a Beneficial Ownership Information report must be complete and accurate. A reporting company must submit a BOI Corrected report to FinCEN no later than 30 days after the date that the company became aware of any inaccuracy in its initial report.
The 30 day period also applies to inaccuracies that are submitted by an individual when obtaining a FinCEN identifier.
Penalties for BOI Reporting Violations
Individuals submitting BOI reports with incorrect or false information violate the Corporate Transparency Act and risk facing civil and criminal penalties. Similarly, FinCEN may prosecute individuals who refuse to provide their identification documents, birthdate, full name, and residential address to a reporting company, as this action interferes with the filing of a Beneficial Ownership Information report.
Managing Beneficial Ownership Information: Essential Tips for Small Businesses
Effectively managing Beneficial Ownership Information (BOI) is crucial, especially for small businesses grappling with the complexities of the Corporate Transparency Act. To streamline this process and ensure compliance, consider these practical tips:
BOI Tip #1.) Protect Sensitive Information
Actively safeguard Personally Identifiable Information (PII) against accidental exposure and data breaches. Implement robust security measures, such as encrypted data storage and restricted access, to prevent unauthorized access by cybercriminals.
BOI Tip #2.) Keep Track of Changes and Updates
Develop a system to regularly check in with all beneficial owners and control parties to:
a.) Verify if their information remains the same.
b.) Gather any new details for FinCEN in a BOI Updated report.
This routine ensures timely updates and maintains the accuracy of your records.
BOI Tip #3.) Prepare Affidavits for Individuals
Secure signed affidavits from all individuals monthly, confirming the accuracy of their provided information. These affidavits reinforce your commitment to adhering to the Corporate Transparency Act and demonstrate your proactive approach in maintaining compliance.