Jan 9

Jan 9 Beneficial Owner Information Reporting - It’s Required, But It’s Not so Bad

DISCLAIMER: All information below represents an interpretation of the Corporate Transparency Act and FAQs from the FinCEN website. This blog not to be used as tax advice or to advise on reporting requirements. As always, consult your tax professional or attorney.

Here is a very simplified explanation of all you need to know about the Beneficial Ownership Information Report (BOIR).

In short: It’s required, the fines are steep and its easy to complete.

Already know you need to report?

Go here for step by step instructions by me for simple business owners.

What is the BOI report?

It’s a required report for most small and midsize businesses to disclose all the beneficial owners of their businesses. The info requested is focused on the identity of the owners and officers.

Why are they doing this to us?

To help reduce and identify fraud and other illegal activities that are often hidden behind small businesses. It came after the Corporate Transparency Act was passed. This does mean its ANOTHER thing you have to do as a small business.

Is my business required to report?

Most likely.

There is a lot of information on who is required to report that gets complicated. To make this as simple as possible I’ve broken down this down in questions to ask yourself.

If you answer yes to ANY of these questions you should file a BOIR:

Are you a corporation?
Are you an LLC?
Was the company created by filing a document with the secretary or any similar office under the law of a state or Indian tribe? *This is the one that is going to require a lot of sole proprietors to have to file, it is very likely that you’ve filed with the SOS.
Are you a foreign entity that is registered to the business in the US by a state filing?

In addition, there are a few exceptions:

There are 23 business types that are exempt. Check the list here. If you are you listed, then congrats none of this applies to you and you can forget all about it!

The one confusing exemption on this list is “large operating company”. This applies to companies that have 20+ employees, a physical office in the US, $5MIL in gross receipts, and more. For more information see here.

All in all, if you aren’t a “large operating company” you are likely going to need to file.

Who is a beneficial owner?

You must report all individuals who are a beneficial owner. A beneficial owner is someone who:

Owns at least 25% of the business or,
Exercises “substantial control” over a company

Obviously “substantial control” is super vague so here is a what that means:

A senior officer (CEO, President, CFO, COO)
Someone who can appoint or remove officers or directors
Important decision maker – another vague one!
Examples of important decisions: able to change the scope and nature of the business, able to sell, reorganize, dissolve, or restructure the business.
Catch all – any other form of substantial control that is in the realm of being able to structurally change the business.

For most small businesses that are run by one individual, its unlikely that there are any other beneficial owners unless you have officers or directors of your business.

When do I have to file?

Filing opened on Jan 1, 2024 on the Financial Crimes Enforcement Network (FinCen) website.

For your initial report, filing depends on when your business opened:

Did your business exist before Jan 1, 2024? You have until Dec 31, 2024 to file your initial report.
Did your business start after Jan 1, 2024? You have 90 days from your open date to file.
Did your business start after Jan 1, 2025? You have 30 days from your open date to file.

How often do I have to do this report?

You only have to file another report if you have changes/updates. Such as new owners, new officers, beneficial owners leaving etc.

But the good news is, for the simple single owner business you are likely only going to file one time.

Does it cost $ to report?

Nope.

What if I don’t report?

The fines are unfortunately SUPER high. $500 for EVERY DAY it is late!

Don’t Panic!

The fines make this really intimidating but the report itself is incredibly simple and quick. So, there is no reason to put it off or worry about it.

Can someone do this for me?

Possibly. But IMO you really don’t need someone to do it for you unless you have a ton of officers and directors and are unsure of their substantial control. If this is the case perhaps it makes sense to reach out to an attorney for help.

If its just a few owners, its super easy and probably not worth paying someone to do it.

Also, speaking for my industry, the requirement is so new its been unclear whether an accountants insurance covers this service so many (including myself) are choosing not to provide this service. However, I promise you don’t need me to complete this.

What items do I need handy for my report?

Basic business info such as EIN and address
For each Beneficial Owner:
- Name, address, and date of birth
- Image of identification to upload (drivers license, state/tribal license/passport)

How long does this take?

I completed this for a business I own (4 owners total) and I timed myself: 24 minutes. Most of the time spent was entering drivers license info and uploading images of ID. For a single owner business I’d say 10 min max.

In conclusion…

It is super likely you need to complete this report for your business. The fines for failing to report are $500/day starting Jan 1, 2025 (assuming you business existed before 2024). It is quick and you can definitely do it on your own!