Prepare and file your beneficial ownership information report (BOIR) properly in time to avoid hefty penalties.
Have you heard about a new US law requirement to report beneficial ownership information (BOI)?
This requirement may well affect you if you have a foreign company registered to do business in the US who must file a beneficial ownership information report (BOIR).
Strikingly, the BOI reporting regulations were subject to numerous court battles, injunctions, and changes (especially, extensions of filing deadlines).
So, keep reading to the very end as we’re going to discuss the BOI reporting developments in this post and its subsequent updates.
Beneficial Ownership Reporting
Starting from January 1, 2024, over 32 million businesses had to comply with a new reporting requirement under the Corporate Transparency Act (CTA) of 2021 in the United States.
The CTA provides for beneficial ownership information reporting requirements. For compliance, companies must report personal information of their business owners to a new federal database of the US government.
The CTA, in particular, requires disclosure of the beneficial ownership information from numerous corporations, limited liability companies (LLCs), and other entities about people who own, control, manage, or file for a company.
So, if you hold or operate a foreign company doing business in the US, Uncle Sam wants to get acquainted with you. That’s not a problem, though. As long as your business is legal, you have nothing to worry about. Sounds good. Right?
The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, sanction evading, terrorism financing, and other illegal activities.
Beneficial Ownership Rule
For these global purposes, on September 29th 2022, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the CTA beneficial ownership information reporting provisions. This rule took effect on January 1, 2024.
Under the CTA and FinCEN beneficial ownership rule, the BOI reports must be filed with FinCEN. Don’t mix it up with the IRS.
The implementation of this new reporting requirement began on January 1, 2024. To comply with this requirement, each reporting company must file a special beneficial ownership form – PDF or online report. It’s like a beneficial ownership declaration.
BOI Reporting Terms
The BOI reporting rules provide for certain terms to file BOIR on beneficial owners of companies.
When do you need to file your initial beneficial owner report?
This initially depended on the year of your company registration.
Reporting Companies
For the new BOI reporting requirement, FinCEN categorizes businesses as existing reporting companies or new reporting companies.
Existing Companies
First, the existing companies are those that were registered before January 1, 2024.
They had to submit their initial beneficial ownership reports by January 1, 2025.
New Companies
Second, the new reporting companies are those registered from January 1, 2024. They fall into 2 subcategories: companies created in 2024 and companies formed after 2024.
The first subcategory had to file an initial BOI report within 90 days of receiving notice of its business registration. The second subcategory must file a beneficial ownership report within 30 days of receiving notice of business registration.
2024
For the FinCEN BOI reporting purposes, the year of 2024 was a transitional period. It determined the BOIR filing term based on 3 company formation timelines: before, during, and after 2024.
So, depending on your company registration year, you had 1 year, 1 quarter, or 1 month to file your beneficial ownership report.
Specifically, if your company was registered before 2024 (prior to January 1, 2024), you initially had 1 year until January 1, 2025. If it was incorporated in 2024 (within January 1 to December 31, 2024), you had 90 days. Finally, if your company is registered after 2024 (from January 1, 2025), you have 30 days.
As such, you initially had to determine whether you needed to file a beneficial ownership report 2024.
If you have any questions on how to report beneficial ownership information, please leave your comment below.
Reporting Companies & Beneficial Owners
To comply with the new requirement to report beneficial ownership information, you should first determine whether the FinCEN BOI reporting rule actually applies to your company and its beneficial owners.
The BOI reporting rule covers various legal forms of business, including limited liability companies (LLCs) and corporations.
Initially, the BOIR rule identified two types of reporting companies:
- Domestic, who are created in the US; and
- Foreign, who are created outside the US but registered or authorized to do business in the US.
Later, however, FinCEN exempted domestic companies as described below.
The FinCEN rule requires reporting companies to file reports that identify 2 categories of reported individuals:
- Beneficial owners; and
- Company applicants.
First and foremost, it’s important to determine whom you need to disclose for beneficial owner registration. To this end, pay attention to “beneficial owner” definition, with the term “beneficial ownership” explained in the FinCEN small entity compliance guide and frequently asked questions.
Beneficial owner, in particular, includes any individual who, directly or indirectly, either:
- Owns or controls at least 25% of the ownership interests of a reporting company; or
- Exercises substantial control over a reporting company.
The FinCEN beneficial ownership rule covers various beneficial holders, beneficial titles, and beneficial interests. Its definition of a beneficial owner is quite broad.
Don’t mix it up with the definition of ultimate beneficial owner for business banking purposes, though. Rather, define beneficial owners strictly under the BOI reporting rule.
So, to comply with the BOIR rule, first figure out whether your company and its beneficial owners are actually subject to this rule. This obviously necessitates a legal analysis.
Ownership Interest & Substantial Control
How to determine whether you need to report beneficial ownership information on companies in the US?
Two keys here are ownership interest and substantial control under the FinCEN BOI reporting rule.
First of all, the term “ownership interest” means shares of corporation or membership interests or units of LLC as well as their convertibles, options, and futures.
Secondly, the term “substantial control” means a “senior officer” position (for example, director, CEO, CFO, COO, or other officer of corporation or manager of LLC as well as general counsel) or contractual role (for instance, nominee, intermediary, custodian, or agent).
Obviously, the term “beneficial owners” includes ultimate beneficial owners (shortly, UBOs). It goes far and beyond, though. Notably, the definition of “beneficial owners” covers not only owners, but also managers. As such, it would be more appropriate to call them not owners, but rather controllers, stakeholders, beneficiaries, or principals. So, keep in mind that the “beneficial owner” meaning is overly broad.
Under the FinCEN beneficial ownership rule, certain individuals qualify for exceptions from the definition of “beneficial ownership”. They, for example, include:
- Minor child until the age of majority;
- Representative (such as nominee, intermediary, custodian, or agent who merely acts on behalf of the actual beneficial owner);
- Employee below senior officer;
- Inheritor of a future interest until becoming the owner; and
- Creditor regarding loan or debt repayment interest.
The second exception on representatives covers individuals who perform ordinary advisory or other contractual services, such as lawyers and tax professionals. So, there’s no need to report these representatives. At the same time, it’s necessary to report the actual beneficial owners.
Penalties for BOIR Violations
What if you don’t comply with this FinCEN BOI reporting rule? Any penalties? You bet!
Potential violations of the BOI reporting rule include willfully:
- Failing to file a beneficial ownership information report;
- Filing false BOI; or
- Failing to update or correct previously reported BOI.
Beware that failure to submit a complete and accurate BOI report may result in huge civil and criminal penalties. According to the CTA, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day of violation. That person may also be subject to criminal penalties, such as a fine of up to $10K and imprisonment of up to 2 years.
The CTA also provides for enhanced criminal penalties, including a fine of up to $500,000 and imprisonment of up to 10 years, if a person commits a violation while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period.
To avoid such drastic penalties, make sure you satisfy the new compliance requirement properly and timely. For instance, check whether you had to file a beneficial ownership report in 2024.
Filing BOIR
To ensure you comply with this important requirement and avoid huge penalties, prepare and submit BOIR properly and timely.
In particular, fill out and file your BOI report correctly in due course from a legal perspective. If you’re unfamiliar with the US corporate law, this is where you may need support from a business attorney licensed to practice law in the US.
Luckily, the BOI report is a one-off endeavor. Reporting companies are not required to submit BOI reports on an annual or other periodic basis.
BOIR Updates/Corrections
Albeit non-regular, BOI report is subject to update and correction within a month. Specifically, you must file an updated/corrected beneficial owner report within 30 days if:
- Any information regarding the reporting company or beneficial owners changes; or
- You become aware or have reason to know of the inaccuracy of information in the earlier report.
There are no penalties for filing an inaccurate BOI report if it’s corrected within 90 calendar days of filing.
To avoid legal troubles, file BOIR correctly in the first place.
2025: Mandatory vs. Voluntary
At the end of 2024, due to a court case challenging the CTA, the BOIR filing requirement was vacated, reinstated, vacated, reinstated, and partially removed. So, the BOI reporting switched from mandatory to voluntary a couple of times. Given such back-and-forth, the BOIR submission deadline first moved to January 13, 2025.
From the beginning of 2025, due to federal court order, reporting companies were not required to file beneficial ownership information with FinCEN. They were also not subject to liability if they failed to do so while the order remained in force. Reporting companies, however, could continue to submit BOI reports voluntarily.
With the BOI reporting suspended by preliminary injunction, businesses were concerned whether to file BOIR as they looked for court battles and FinCEN BOI updates. They shortly flipped the switch back on.
BOIR Back in Effect
In February 2025, the BOIR filing requirement was reinstated again. As such, the BOI reporting became mandatory once more.
In view of such back-and-forth, FinCEN further extended the BOIR submission deadline to March 21, 2025.
Notably, the US Supreme Court ruled in favor of FinCEN. Specifically, SCOTUS removed the temporary nationwide injunction on BOI filing. Although there was a separate injunction in another case, a federal court cleared the way for the CTA.
Thus, the beneficial ownership reports became mandatory again. If a reporting company failed to file BOIR, it would be subject to liability.
It’s important to file beneficial owner reports timely by the deadline because the penalties for failure to comply with this corporate law rule are huge. So, make sure to submit a correct BOI report from a legal standpoint.
Reporting Company – Foreign Entity
On March 26, 2025, FinCEN issued an interim final rule that removed the requirement for US companies (previously known as “domestic reporting companies”) and US persons to file BOIR. So, all entities created in the US and their beneficial owners became exempt from the requirement to file BOIR with FinCEN under the CTA.
In its regulations implementing the CTA, FinCEN narrowed the definition of “reporting company” to mean only those entities formed under the law of a foreign country that have registered to do business in any US state or tribal jurisdiction by filing a document with a secretary of state or similar office (formerly known as “foreign reporting companies”).
Having limited the “reporting company” term to foreign companies, FinCEN formally exempted domestic reporting companies from the CTA’s reporting requirements.
Also, reporting companies now do not need to report BOI of any US persons who are their beneficial owners. For example, foreign pooled investment vehicles are not required to report any US person who exercises substantial control over the entity.
Likewise, the US persons are exempt from having to provide BOI with respect to any reporting company for which they are beneficial owners.
At the same time, foreign entities that meet the new definition of “reporting company” and do not qualify for an exemption from the reporting requirements are required to file with FinCEN under new deadlines.
Specifically, reporting companies registered to do business in the US before March 26, 2025, must file BOI reports by April 25, 2025. Reporting companies registered to do business in the US from March 26, 2025, in turn, have 30 calendar days to file an initial beneficial ownership report after receiving notice that their registration is effective.
By the way, FinCEN announced its intention to revise the BOI reporting rule further on. So, stay tuned for FinCEN BOIR updates.
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If you need legal help with your company beneficial ownership information reporting, feel free to contact us.
