WTF is a BOI Report?

Demystifying the Corporate Transparency Act & BOI Reporting Requirements

Dec 25, 2024

UPDATE AS OF 12/27/2024

Late last night the Fifth Circuit Court of Appeals re-imposed an injunction that essentially stops FinCEN from enforcing the CTA. The court has not yet stated whether the CTA is constitutional. The injunction remains in effect until the court finishes deciding whether the CTA is constitutional. As of 12/24/2024, FinCEN is accepting voluntary BOI Report submissions. Stay tuned for additional updates.

Original Article

Published on December 25, 2024.

Does your band have an LLC? Do you have an s-corp. for your small business? If so, keep reading.

(Hopefully) by now you’ve heard something about having to file a “BOI Report”. The purpose of this article is to (i) explain this new reporting requirement and deadlines, (ii) help you determine whether it applies to you, (iii) teach you how to file the report, (iv) highlight common mistakes, and (v) warn you about scammers. There are many intricacies to this topic. The goal of this article is to address the most common scenarios. This article contemplates very basic ownership structures only (i.e., an LLC with 1-4 individual members). Feel free to write to me separately if you have questions about more complex ownership structures.

It costs $0 to file a BOI Report yourself. There is no filing fee. See below for some warnings on scammers that are taking advantage of small business owners. You may choose to hire an attorney to conduct the Beneficial Ownership analysis (since it can get tricky) and file the BOI Report. This is a safe option, since an attorney is ethically obligated to review your company’s information to ensure correct filing. The analysis involved is a legal analysis, and so I do not recommend that accountants perform this service. Most accountants’ professional liability insurance does not not cover them in this area, since it’s deemed to be a legal service.

The Purpose

The Corporate Transparency Act (the “CTA”) came into effect on January 1, 2024. The purpose of the CTA is to help the Financial Crimes Enforcement Network (“FinCEN”) combat money laundering and other financial crimes. The CTA requires all companies (with a few exceptions) to declare their “beneficial owners” by filing a Beneficial Ownership Information Report (a “BOI Report”) with FinCEN. Failure to file a BOI Report carries hefty penalties.

The reporting deadlines vary based on when a company was formed. In general, any company formed before January 1, 2024, must file its BOI Report by January 13, 2025 (this 13-day extension was recently granted). Companies formed in the year 2024 have ninety (90) days from the day they were formed to file. Companies formed on or after January 1, 2025, have thirty (30) days from the day they were formed to file.

There are deadline extensions granted to businesses that operate in areas affected by certain hurricanes, but those won’t be discussed in this article.

This is technically a “one-time” reporting requirement (as opposed to annual), however the information you report must be updated when any of it changes. See below for more information on keeping your BOI Reports updated.

Who Must File

The reporting requirement applies to all US companies (and all foreign companies that have registered to do business in the US). It does not apply to individual people nor trusts. The term “companies” here includes limited liability companies (LLCs), corporations, S-corporations, partnerships, limited partnerships, and any other entity that is formed by filing documents with any Secretary of State.

It does not matter whether the company “doesn’t do anything”, does not conduct any business or make any profit, or doesn’t hold any assets - all companies must file. If you or your band formed an LLC, that LLC must file a BOI Report. If you formed an s-corp. for you small business, that s-corp. must file a BOI Report. If you formed and LLC to hold title to an investment property, that LC must file a BOI Report. If you formed a company earlier this year for a project that fell through and was abandoned, that company may still need to file a BOI Report.

There are limited exceptions to the types of companies that must file (for example, tax-exempt entities, banks, state-licensed insurance companies, credit unions, and other types of companies that are already heavily regulated). If you are reading this article, chances are you do not meet these exceptions and you must file. Section 1.2 of the FinCEN Small Business Compliance Guide explains the various exceptions in detail.

How to file a BOI Report

First - Determine the “Beneficial Owners”

“Beneficial Owner” for the purpose of the CTA means any person who:

Directly or indirectly owns 25% or more of a company; OR
- Example: direct shareholders, shareholder of a parent company, beneficiary of a trust that owns a company.
Directly or indirectly has the ability to exercise substantial control over a company (even if they own 0% of the company - weird, I know).
- Example: any officer (president, vice president, secretary, treasurer, director), managers, officers or managers of a parent company, trustee of a trust that owns a company.

Second - Gather the information of the company and of the Beneficial Owners

Collect the following information on the company:

Complete legal name
State of formation
EIN
US address
If formed on or after January 1, 2024, the names, addresses, and IDs of those who formed the company

Collect the following information on each Beneficial Owners:

Address
Copy of government issued ID (choose the form of ID with the latest expiration date - I’ll explain why later)

Third - File the BOI Report

The easiest way to file a BOI Report is through FinCEN’s E-Filing System. I recommend selecting the second option, to “File Online BOIR”, which will send you straight to the online portal where you can enter the information, upload the IDs, and submit the BOI Report. Once you submit, you will receive a Report Confirmation. Review this carefully for any errors, and keep it in your files for future reference.

FinCEN has a 5-minute demo video here.

Failure to file a BOI Report results in civil penalties of $591/day, and potential criminal penalties as well including imprisonment.

Fourth - Keep the BOI Report Updated

When ANY of the information you reported changes, you must file an Updated BOI Report within thirty (30) days of the change. Below is an incomplete list of common “changes”:

Change in legal name of a Beneficial Owner (did you get married or divorced? Update that BOI Report!)
Change of name of the company
Change of address of a Beneficial Owner (did you finally make that move you always dreamed of? Update that BOI Report!)
Expiration and renewal of, or change of information on, the form of ID submitted (did you get a new ID with your new address issued? Did you get your passport renewed? Update that BOI Report!)
Addition of a new owner or manager (did you appoint your new business savvy bass player as a manager of the band’s LLC? Did your ownership of the LLC finally surpass 25%? Update that BOI Report!)
Removal of an owner or an officer (did you kick out that deadbeat tambourine player finally and remove him as a manager of the LLC? Update that BOI Report!)

Failure to update a BOI Report results in civil penalties of $591/day, and potential criminal penalties as well including imprisonment.

Common Mistakes to Avoid

Be Sure to Identify ALL Beneficial Owners

The definition of “Beneficial Owner” is actually not very intuitive. For example, a manager of a company who owns 0% of the company is still a Beneficial Owner. Anyone with the authority (even if they do not exercise that authority) to make major decisions about a company, its business operations, or its assets, could be a Beneficial Owner.

Trying to Be Sneaky

Unless your company clearly meets one of the exceptions listed in Section 1.2 of the FinCEN Small Business Compliance Guide, you cannot avoid reporting. I’ve seen awful advice on social media, like, “Put the company in a trust. Boom. Problem solved.” Problem NOT solved. In that scenario, you’d then have to look up to the trust to determine the beneficial owners (who is the trustee? who are the beneficiaries and what rights to withdrawal do they have? Is there a protector?). Regardless of how clever you get with the ownership of a company, the company must still file a BOI Report.

Willful failure to file a BOI Report may be subject to both civil and criminal penalties; from fines of $591/day, all the way up to possible imprisonment and a fine of $10,000.

Forgetting to Update a BOI Report

When ANY of the information you reported changes, you must file an Updated BOI Report within thirty (30) days of the change. See above for more details on when to update a BOI Report.

Failure to update a BOI Report results in civil penalties of $591/day, and potential criminal penalties as well including imprisonment.

Watch out For Scammers!

If you have a company, you’ve probably received some intimidating and official looking letters and emails offering to file your BOI Report for you for a few hundred bucks. Here is an Alert published by FinCEN on these fraudulent schemes. These “corporate service providers” are not attorneys and they are not part of any government agencies. They search the internet for company names, and then send letters shouting about how there’s an IMPORTANT COMPLIANCE REQUIREMENT and you MUST FILE IMMEDIATELY or face SEVERE PENALTIES, and that if you do not pay them to file your BOI Report you will GO TO JAIL. These companies then send you a form, asking you to identify the Beneficial Owners and provide all of the information. They review zero due diligence and conduct zero analysis to ensure the information is even accurate. Also, what do they then do with that very private information, like copies of your IDs that you send them? Sell it? Probably.

I encourage you to either file your own BOI Report, or speak to an attorney.

Closing Remarks

If you made it this far - great job! I hope you found this information to be helpful. I’m not going to opine on the constitutionality of this reporting requirement; that’s for the courts to hash out. Let me know if you’re interested in the court cases that have taken place so far - I’d be happy to write about it. I encourage you to take the CTA and BOI Reports seriously, and please reach out with any questions. Finally, FinCEN has a pretty decent FAQ page that I recommend looking at first.

Let me know what other topics you would like to read about!

*THIS ARTICLE DOES NOT CONSTITUTE LEGAL ADVICE - YOU SHOULD ALWAYS DO YOUR OWN RESEARCH AND CONSULT WITH A LEGAL PROFESSIONAL*