Overview
Beneficial Ownership Reporting for Small Businesses
In 2021, Congress enacted the bipartisan Corporate Transparency Act to curb illicit finance. This law requires many companies doing business in the United States to report information about who ultimately owns or controls them. This is part of the federal government’s anti-money laundering and anti-tax evasion efforts and is an attempt to look beyond shell companies that are set up to hide money. Unfortunately, this will impose burdensome reporting requirements on most businesses.
Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners (i.e., the individuals who ultimately own or control the company). They will have to report the information to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department, through an electronic filing system.
The introduction of the Corporate Transparency Act (CTA) alongside new reporting requirements signifies a pivotal change in compliance obligations for businesses in the United States. These measures aim to enhance transparency and combat financial crimes by mandating millions of businesses to report ownership information to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
Summary: Many (most) companies are required to report information to FinCEN about the individuals who ultimately own or control them. FinCEN began accepting reports on January 1, 2024
Impacted Entities
Impacted entities include existing and newly-formed corporations, limited liability companies (LLCs), limited partnerships, and other entities that file formation papers with a state’s Secretary of State’s office (or similar government agency).
The vast majority of for-profit business entities will be required to file this report
Exempt Entities
While many small businesses are impacted, nearly two dozen types of businesses are exempt, including sole proprietors, accounting firms, insurance companies, banks, certain large businesses (Large Operating Companies).
Heavily regulated entities that already report such information to other federal agencies, or companies with real business activities that are not perceived to be a high risk for money laundering, are exempt from reporting. These include, among others:
Exempt Large Operating Companies are companies that 1) employ more than 20 full-time employees in the United States, 2) reported more than $5 million in gross receipts or sales in the aggregate on their previous year’s federal tax or information return, and 3) have an operating presence at a physical office in the United States.
There are 23 types of entities exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.
Reporting Requirements
Required Information: Reporting companies must provide FinCEN with information on their beneficial owners and company applicants (those who filed to create or register the business). This includes personal details like birthdays, addresses, and government ID images, along with the business name, addresses, jurisdiction of formation, and taxpayer identification number.
Purpose: The information will be used in a national registry to aid authorized users, such as law enforcement and financial institutions, in increasing transparency about the identities of business owners and controllers to prevent crimes like money laundering.
Who is a Beneficial Owner: Owners who directly or indirectly own more than 25% of the entity’s ownership interests; OR individuals that exercise substantial control over the reporting company (even if they do not actually have an ownership interest). This includes senior officers of the business as well as those individuals who are involved in any significant business decisions (e.g., board members).
Substantial Control: An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
The individual is an important decision-maker for the reporting company. Important decisions include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.
The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”).
What type of Information is reported?
Entities must provide the following for the entity and its beneficial owners:
Entity full legal name and any trade names/DBAs
US Address and jurisdiction of formation
Federal EIN or ITIN
Beneficial owner full legal name and date of birth
Owner current residential address
Owner Federal ID number with image of a legal non-expired document such as a US passport, state driver’s license, State ID, or foreign passport.
Important Dates
Existing Companies: For those created before January 1, 2024, the FinCEN BOI report must be filed before January 1, 2025.
Initial report of existing entities formed prior to January 1, 2024: file the initial report no later than January 1, 2025.
Initial report of newly formed entities after December 31, 2023: file the initial report no later than 90 days from the entity’s formation.
Initial report of newly formed entities after January 1, 2025: file the initial report within 30 calendar days
Subsequent report due to change in information or change in beneficial owners/senior executives: file a report within 30 days of the date of the change.
Action Steps
Determine Applicability:
Review your business structure to ascertain if you fall under the reporting requirements.
Gather Required Information:
Prepare the necessary documentation for all beneficial owners and company applicants.
For each beneficial owner, you will need to provide:
Full Legal Name
Date of Birth
Complete Current Address
Unique identifying number and issuing jurisdiction
Image of one of the following non-expired documents:
US Passport
State Driver’s License
Identifying Document issued by a state, local government or tribe
Foreign passport (only if none of the above)
File Report:
Utilize FinCEN's electronic system to submit your BOI report within the designated timeframe.
1) Apply for FinCEN ID (optional)
What is a FinCEN ID: A FinCEN ID is a unique identifying number issued to an individual by FinCEN. Although there is no requirement to obtain a FinCEN ID, doing so can simplify the reporting process.
What does a FinCEN ID do for individuals?: An individual beneficial owner or company applicant's FinCEN ID can be reported instead of required information about that individual on the reporting company's Beneficial Ownership Information Report (BOIR) submitted to FinCEN.
2) File the Beneficial Ownership Information Report (BOIR)
New Companies (2024): Companies formed in 2024 have 90 days post-creation to file.
New Companies (2025 and beyond): Must file within 30 days of creation or registration.
Updates and Corrections: Any changes or inaccuracies discovered in previously filed information must be reported within 30 days.
3) File a revised BOIR for changes in beneficial owners/senior executives
Prepare and Submit new Online BOIR when filing updates/corrections
Subsequent report due to change in information or change in beneficial owners/senior executives: file a report within 30 days of the date of the change.
Direct File Now
Fincen.gov direct File
File Directly with FinCEN
login.gov account suggested
Can acquire a FinCEN ID
File PDF or Online
Single-Owner Entities
Free to File
FincenFetch Self-Service
Simple and Intuitive Step-by-Step Online Process
Tech Support Available
Seamlessly Coordinates with other Beneficial Owners
Multi-Company Support
File Multiple Reports
$299 Flat-Fee / Report
Panakos BOI Filing Package
Multi-Party Supportive Online Process
Pre-Filled Fields for Existing Businesses and Current Clients
Direct-Message Live Filing Support Chat
We review submission data for accuracy prior to submittal to FinCen
$599 Flat-Fee / Report* (additional fees for rush-filings)
Penalties
Penalties for non-filing or late filing:
Up to $500 per day until the violation is resolved
Fines of up to $10,000 and/or 2 years imprisonment due to criminal charges
Non-compliance or providing false information can result in fines of $5,000 or more per violation, including daily fines for errors and omissions.
Penalties can be imposed against the beneficial owner, the entity, and/or the person completing the report
Other Resources
For a more detailed guide, please consult the FinCEN website: www.fincen.gov/boi. Some items of importance include determining if your entity is impacted, who is a beneficial owner, and what type of information to report. Additional direct links: