In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new Beneficial Ownership Information (BOI) reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
“Beneficial ownership information” refers to identifying information about the individuals who directly or indirectly own or control a company. There is no fee for submitting your beneficial ownership information report to the Financial Crimes Enforcement Network (FinCEN).
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report. This deadline is shorter for entities created on January 1, 2024 or later.
The penalties for failing to comply with this reporting requirement are substantial.
As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591.
A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
What are the reporting deadlines?
FinCEN launched the BOI E-Filing website for reporting beneficial ownership information (https://boiefiling.fincen.gov) on January 1, 2024. The reporting deadlines depend on when the business entity was created.
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
A reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
Which companies will be required to report beneficial ownership information to FinCEN?
Companies required to report are called reporting companies. There are two types of reporting companies:
Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
There are 23 types of entities that are exempt from the reporting. Carefully review the qualifying criteria before concluding that your company is exempt, or review the criteria with legal counsel.
Are some companies exempt from the reporting requirement?
Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.
The following table summarizes the 23 exemptions:
Exemption No. | Exemption Short Title |
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 | 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 |
Who is a “beneficial owner” of a reporting company?
A “beneficial owner” is an individual who either directly or indirectly: (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of a reporting company’s ownership interests. Because beneficial owners must be individuals (i.e., natural persons), trusts, corporations, or other legal entities are not considered to be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about a beneficial owner (see Question D.12).
What is “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. See Question D.3 for more information.
The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide.
Will a reporting company need to report any other information in addition to information about its beneficial owners?
Yes. The information that needs to be reported, however, depends on when the company was created or registered.
If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants.
If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants
Is there a requirement to annually report beneficial ownership information?
No. There is no annual reporting requirement. Reporting companies must file an initial BOI report and updated or corrected BOI reports as needed.
What should I do if previously reported information changes?
If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.
A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.
When should you file a BOI report?
Now that this law is effective, you should file it NOW to avoid any compliance violations.
The Grady Firm attorneys are able to assist you with preparing the BOI report, and other corporate functions, such as creating a legal entity with the Secretary of State; obtaining an Employer Identification Number (EIN) number from the IRS; obtaining a local business license; determining which permits are required; drafting contracts; and creating website privacy policies.
To schedule a complimentary 15-minute consultation with The Grady Firm’s attorneys: call +1 (949) 798-6298; or fill out a Contact Request Form.
*This article is for informational purposes only, and does not constitute legal advice or create an attorney-client relationship. This article does not make any guarantees as to the outcome of a particular matter, as each matter has its own set of circumstances and must be evaluated individually by a licensed attorney.