On January 1, 2024, the new requirement to file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) went into effect. More than 32 million entities – mostly small businesses – have to file this report, which is required by a federal law called the Corporate Transparency Act. Violations of this law can result in a civil penalty of up to $591 per day the violation continues and criminal penalties of up to $10,000 and two years in prison.
Below is a checklist of steps all small business owners should be taking now.
Step 1 – Determine if your small business is the type of entity that may have to file a BOI report
- Know your company’s entity structure – is it an LLC, corporation, limited partnership, limited liability partnership, business trust, sole proprietorship, or general partnership?
- Recognize that if it is an LLC or corporation, it is required to file a BOI report unless it qualifies for an exemption.
- Recognize that if it is not an LLC or corporation you will have to make a determination as to whether it will be required to file a BOI report in the absence of an exemption. You should review the definition of a “reporting company”, FinCEN’s guidance, and if necessary seek legal advice.
Step 2 – If you believe your small business has to file a BOI report, determine if it qualifies for an exemption
- Determine if it is exempt as a “large operating company.” (Meaning it has more than 20 full time employees in the US, an operating presence at a physical office in the U.S. and filed a tax return for the previous year showing more than $5 million in gross receipts or sales from U.S. sources.)
- Determine if it is exempt as an “inactive entity.” (Meaning it was in existence on or before January 1, 2020, is not engaged in active business, is not owned by a foreign person, hasn’t changed owners in the last 12 months, hasn’t sent or received funds in an amount greater than $1,000 in the last 12 months, and doesn’t hold any assets.)
- Determine if any other exemption applies to your company. If you are not sure you may wish to seek legal advice.
Step 3 – If you determine that your small business has to file a BOI report, do the following
- Determine who your beneficial owners are. (That’s every individual who substantially controls the company and/or owns or controls 25 percent of its ownership interests).
- If you are not sure who meets the definition of beneficial owner, you may wish to seek legal advice.
- Contact each beneficial owner to tell them that the Corporate Transparency Act requires your company to report personal information about them to FinCEN.
- Tell them they have the option to provide the information to the company or to apply to FinCEN for a FinCEN Identifier.
- Obtain the information that must be reported from each beneficial owner that is not going to apply for a FinCEN Identifier and tell them to let you know about any changes to the information before you file the initial BOI report.
- Compile the information about the company that must be reported and keep it up to date.
Step 4 – Implement a procedure to make sure the information you must report will be kept up to date
- Both so that it is current when you file your initial report and so that you file the required updated reports upon changes in the reported information
- Consider purchasing an entity management system if you don’t have one already.
- Make sure you have a secure system in place to store personal information.
Step 5 – Determine when and how you want to file your initial BOI report
- You have until January 1, 2025 to file. Decide if you want to file early or late.
- Decide if you want to file the report with FinCEN yourself, or if you want the assistance of a third party service provider such as CT Corporation.
Step 6 – Repeat Steps 1 through 5 for each small business you own
(H2) Step 7 – Other actions you may consider taking
- Consider dissolving any entities that are not needed or are inactive.
- Consider amending your governing documents (such as your operating agreement or shareholder agreement) to address the beneficial owners’ obligations regarding the providing of personal information.
BOI reporting is here. Use this checklist to help ensure your compliance.
Learn more
Take our quiz to determine Beneficial Ownership Information filing status. For more information, visit our Beneficial Ownership Information Report solutions page.
