7-Minute Read

I hope the timing of this blog is better late than never. It is a reminder about a FinCEN reporting requirement with a January 1st, 2025 deadline for most companies. If this is the first time you’re hearing about it, I don’t blame you.

Under the Corporate Transparency Act (CTA—passed in 2021), companies are required to share critical information about their beneficial owners starting this year (2024). This legislation aims to combat money laundering and other financial crimes. To clarify the acronym in the title, affected companies must file a beneficial ownership information (BOI) report.

You may need to comply with this reporting rule if you have ownership or control over a closely held business such as an LLC or Corporation. Why should you care? The penalties for non-compliance are brutal as highlighted by this direct comment from FinCEN.

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.

Much information regarding the reporting requirements is available online now. This piece is somewhat unique because I lay out the specific steps I took to file a BOI report for my business.

If you are navigating this reporting process yourself, I suggest downloading and reviewing the FINCen Small Entity Compliance Guide. It has a comprehensive FAQ and helpful visuals. In this piece, I’ll refer to this as simply “the guide.”

As an IRS-enrolled agent, I can offer general guidance and instructions in simpler situations. The good news is that these simpler cases don’t take much time to complete. However, for more complex situations, you may need assistance from a legal service or attorney.

In this piece, I will first address some key questions you are likely to have about this process. Then, as promised, I will walk you through the steps I took to complete a BOI report for my own company.

Q1 – Does Your Company Have a Reporting Requirement?

The Reporting Rule requires all “reporting companies” to file BOI reports with FinCEN within specified timeframes (detailed shortly). A reporting company is any entity that meets the “reporting company” definition and does not qualify for an exemption.

Assuming your company is subject to US laws, you may have a reporting company if you answer yes to any of these three questions:

• Is the company a corporation?
• Is the company a limited liability company (LLC)?
• Was the company created by filing a document with the Secretary of State or any similar office under the law of a State or Indian tribe? (that’s a mouthful).

For more details, see the flow chart in Section 1.1 of the guide. Here, they make some further distinctions between a “domestic” and “foreign” reporting company that may apply to your company.

Notably, having LLCs as part of this reporting requirement extends compliance to entities you might not think have to deal with this. Think home-based businesses or LLCs only used to hold rental real estate.

Next, you can see if any exemptions apply. These are detailed in Section 1.2 of the guide. Generally, a financial services company (e.g., bank, broker/dealer, insurance company) will be exempt. These kinds of companies are largely subject to other forms of regulations and oversight. Another notable exception is for large companies. They are defined as having more than 20 full-time employees and generating more than $5 Million in gross receipts or sales.

If you’re still unsure if you need to file after all this, you have two practical options, as I see it.

• Consult your attorney, or…
• File the BOI report(s) anyway. You won’t get penalized for filing a report on a company that didn’t need to report in the first place.

Q2 – Who is a Beneficial Owner?

If your company is a reporting company, your next step is to identify its beneficial owners.

A beneficial owner is any individual who, directly or indirectly:

• Exercises substantial control over a reporting company, OR
• Owns or controls at least 25 percent of the ownership interests of a reporting company.

For substantial control over a reporting company, an individual needs to meet any of the following four criteria:

• The individual is a senior officer.
• The individual has the authority to appoint or remove certain officers or a majority of directors of the reporting company.
• The individual is an “important” decision maker, or
• The individual has any other form of substantial control over the company.

For more details, see Section 2.1 of the guide.

For ownership interests of a reporting company, an individual needs to have any of the following:

• Equity, stock, or voting rights
• A capital or profit interest
• Convertible instruments
• Options or other non-binding privileges to buy/sell any of the above
• Any other instrument, contract or mechanism used to establish ownership

For more details, see section 2.2 of the guide, which also has some steps for identifying your company’s beneficial owners and determining whether any exceptions apply (e.g., minor child).

Q3 – When Should You File?

Reports were allowed to be submitted starting on January 1, 2024. Here is a breakdown of the deadlines:

• Reporting companies created or registered to do business before January 1, 2024, will have until January 1, 2025 to file their initial BOI reports.
• Reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective to file their initial BOI reports.
  • Specifically, 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.

These are some strict timeframes to consider! As more people become aware of these requirements—likely at the last minute—I hope the FinCEN website can manage the year-end rush. When this issue first came to my attention in October 2024, I learned from the prominent attorney Martin Shenkman that around 32 million entities were expected to be affected, but only 10 percent had submitted their reports. The sooner you can complete this, the better.

How I Filed a BOI Report – Step by Step

The entire process took me about twenty minutes to complete. Some of you will get it done faster, and others, with more reporting entities to disclose, will take longer.

I did two main things. First, I created a FinCEN Identifier. Then, I filed the actual BOI report. Let’s look briefly at each part.

One – Create a FinCEN Identifier

I want to clarify that taking this initial step is not strictly necessary; some people may choose to skip it and go directly to filing the report. However, I believe that completing this first step can save you time and hassle in the long run.

If you are the beneficial owner (as previously defined) of multiple entities, you will need to provide your personal information for each one. This is straightforward if you are the sole owner and have complete control over each entity. However, if you co-own a larger company and someone else is responsible for handling the Beneficial Ownership Information (BOI) reporting, you will need to provide them with your date of birth, address, and identification (like a driver’s license).

As an alternative, you can create a FinCEN Identifier for yourself. Once you have this identifier, you only need to provide it to the individuals filing the BOI reports in the future. This means you won’t have to share any personally identifying information again.

Another advantage is that if you change your address, which usually requires an update to your driver’s license, you only need to update your individual FinCEN profile once. After all, how are the affected companies supposed to know about changes in your personal information if you don’t inform them? You just focus on keeping your personal information up to date with FinCEN.

Here are the steps I took to create an ID:

• Visit the website: https://fincenid.fincen.gov/landing
• They will prompt you to create an ID using Login.gov (if you’re not already registered there).
• I used my personal email address in the process. I then created a password and set up multi-factor authentication. They asked for two backup methods, so I chose my cell phone and an authenticator app.
• You’ll need to enter your date of birth and home address. You’ll also be prompted to upload a picture of your ID. I used my driver’s license. But other forms are acceptable, like your passport.
• After clicking submit, I immediately received my FinCEN ID, a 12-digit number. Please store this number safely.

Two – File the BOI Report

Now, hopefully and finally, you’re ready to file the report electronically. Here’s what you can expect to do based on the way I completed it.

• Visit the FinCEN website: https://fincen.gov/boi
  • Optional: There’s a 5-minute video you can watch before starting the process.
• File Box
  • Click “File a report using the BOI E-Filing System”
  • Under BOI E-Filing, click “Get Started”
  • I chose “File Online BOIR” and “Prepare & Submit BOIR”. However, there’s also a PDF option available.
• Filing Information
  • Type of Filing: Since this was my first time, I chose “Initial Report” (today’s date should populate)
• Reporting Company
  • I entered the legal name of my company. If your company has an alternate name or DBA (doing business as), there will be a spot to enter that.
  • Tax ID Type: I chose my employer identification number (EIN), which must be entered without dashes. If you don’t have an EIN, they will allow you to use a Social Security Number.
• Jurisdiction
  • United States of America
  • State of Formation: I chose Texas because that’s where I initially filed LLC paperwork for my company (and still operate).
  • I then entered my Business Address.
• Company Applicant
  • Since my company was formed before 2024, I checked the box for “Existing Reporting Company,” which subsequently disabled all the fields in this section.
  • If your company was created in 2024, you must complete this section. See section 3 of the guide.
• Beneficial Owner
  • Here, I entered my newly created FinCEN ID from the last section.
  • If there are multiple Beneficial Owners, click “Add Beneficial Owner” and add their information.
• Submit
  • I entered my business email and name.
  • I selected the checkbox for “I agree”.
  • Get through the Captcha verification.
  • Click “Submit BOIR”
• Confirmation Page
  • Click “Download Transcript” or note down the BOIR ID, Submission Tracking ID and timestamp information
  • I also received an email confirmation.

If you have comments or questions on this piece, please drop me a line at: [email protected]

References

1. https://fincen.gov/
2. https://www.fincen.gov/boi/small-entity-compliance-guide
3. https://shenkmanlaw.com/
4. https://fincenid.fincen.gov/landing
5. https://fincen.gov/boi

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