FinCEN Mandatory Business Ownership Reporting

Applies to Corporations and LLCs in the US

NOTE: There are exemptionsfor certain types of businesses (such as Banks, Credit Unions, Brokers, Insurance Companies, and others which already mustregister with other agencies).1Since soap and cosmetic handcrafters don’t fall under any of these other categories, they have been ignored for the purposes of this article

All corporations, LLCs, or other businesses types that are registered with a state or Indian tribe must register their Beneficial Ownership Information (BOI) with the Financial Crimes Enforcement Network (FinCEN), a department of the US Treasury (unless they are specifically exempted).²

The reasoning behind this reporting requirement is so the federal government has information about who owns or controls a corporation or LLC. According to their FAQ, this will "make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures."³

In other words, they want to be able to track the actual people behind corporations and LLCs to be able to tell who is responsible when the companies are laundering money, supporting terrorism, or otherwise doing bad stuff.⁴

The information collected in the new database may be made available to Federal agencies engaged in national security, intelligence,or criminal or civil law enforcement activities; state, local and Tribal law enforcement agencies; foreign law enforcement agencies or other authorities; financial institutions; and Treasury/tax officers or employees. There are authorization requirements as well as security and confidentiality requirements for those accessing the information.⁵⁶⁷

Companies that are required to register

A business that has registered as a corporation, LLC, or other business type with a state or Indian Tribe must register unless they have over $5 million in revenue and over 20 employees (or are one of the exempt types of businesses). That's called a "Reporting Company."⁸

In other words, if you have filed as a corporation or LLC and the legal name of your business is not your own name (as in a Sole Proprietorship), you need to register.

Sole Proprietorships

A sole proprietor is not a reporting company unless the sole proprietorship was created by filing a document with a secretary of state or similar office(not usual). Filing with a government office to get an IRS Employer Identification Number (also called a Federal Tax Identification Number), a fictitious name (DBA), or professional license does NOT make the sole proprietor a reporting company.⁹

Beneficial Ownership

A "beneficial owner" is a person who either owns or has substantial control over a company.

It's someone who directly or indirectly controls a company.¹⁰

Information on all beneficial owners must be reported as part of the report process.

Ownership

Generally, the owners are the individuals reported in the original document filed with the state. It could be one or more individuals.¹¹ For the purposes of this reporting requirement, the person must own at least 25% of the company.

The owner(s) are normally the people who receive the profit of the company. For smaller, one-person LLCs, it would be the person whose tax return includes the income from the company.

Control

In some companies, there are individuals who are not actually owners, but have substantial control over the company. That control might come in the form of contracts, arrangements, understandings, board membership, voting rights, business relationships, employment as senior officers, etc.

If you own your company, buthave hired someone else to run it for you, that person would likely have substantial control and would be considered a "beneficial owner."

Company Applicant(s)

The person who actually filed the documents with the state is always considered a company applicant. There may be an additional company applicant if someone else directed or controlled the filing action.¹²

For companies that were created and registered with their state AFTER January 1, 2024, at least one company applicant must be reported.

Direct Filer

The "direct filer" is the person who actually filed the documents with the state.¹³ There is always a direct filer.

If you filed the documents to create your company then you are the direct filer.

However, if you hired a corporate serviceto do it for you, then thepersonthat filed the documents for you is the direct filer. It can't be a business or company name; it must be an actual individual person.

Directed or Controlled the Filing Action

When the direct filer is a person that was hired to do it, then the person who told them to do it and gave them the information would be the one who "directedor controlledthe filing action."¹⁴

If you gave all the information to a corporate filing service and they directly filed the documents for you, then you are the one who directed or controlled the filing action.

However, if you hired anattorney to create your company and the attorney specified the details to go on your LLC documents and then directed someone to file the documents, then the attorneywould bethe person who directed or controlled the filing action.

Online Services

If you used an online service of some kind, where you filled in the forms and they filed the incorporation or LLC documents based on what you filled in, then you are considered a direct filer and the only company applicant. The web service you used does not need to be included in the FinCEN report.¹⁵

Required information – Filling in the Forms

When you go to file your Beneficial Ownership Information report on the Financial Crimes Enforcement Network website, you’ll need detailed information about:

• Your company
• Each beneficial owner (all owners oror personswith substantial control)
• Each company applicant

Get the information together before you start the filing process.

Also notethat if you discover that your original report has some inaccurate information, there is a safe harbor from any penalties if you voluntarily correct it within 90 days.

Company Information

For your company, you will need:¹⁶

• The full legal name as registeredwith the state.
• Any trade name(s) or "doing business as" name(s) you have filed for your company.
• Complete US address (the principal place where business is carried out).If you work out of your home, it is your home address. It cannot be a Post Office box or mail forwarding service.¹⁷
• The state or tribal jurisdiction where your company was formed.
• IRS Taxpayer Identification Number (TIN) and/or Employer Identification Number (EIN).

Individual information

For EACH individual associated with the company as abeneficial owner or company applicant, you must provide the following information:¹⁸

• Full legal name;
• Date of birth;
• Complete current address (residential street address). When the company applicant is part of a business, their business address may be used;¹⁹
• The identifying number, issuing jurisdictionand an imageof ONE of the following:
  • US Passport,
  • State driver’s license, OR
  • Other government issued identification document.

Alternately, if an individual has a FinCEN identifier,²⁰ that can be used instead of the required information above.²¹ This would most likely only apply if you were dealing with a company for filing your corporate documents and they had filed for a FinCEN number.

NOTE: If an owner is a minor child, there are special accommodations forreporting the information. See the Small Companies Compliance Guide for details.

Initial Report Deadlines

Initial reports are required by all companies that meetthe definition of a reporting company and aren’t otherwise exempt.The report deadlines are as follows:²²

Updated Information

If there are any changes to the required information about your company or any of the beneficial owners, you must file an updated reportwith the new information within 30 days.

Remember that "beneficial owners" includes not just owners of the company, but those who have substantial control over the company.

Examples of changes which should be reported:

• Change of company address;
• Getting a new fictitious name (DBA) for your company;
• Change of address of any of the beneficial owners;
• Change of a person whohad substantial control (e.g.,a new company manager hired);
• Change of identifying documentation of anybeneficial owner (i.e. new driver’s license, new passport);
• An owner who was a minor now coming of age;²³
• Changes from the death of a beneficial owner should be reported when the estate is settled.²⁴

Penalties

The possible penalties for failing to file or update your information can be quite harsh.

A person who "willfully violates" the reporting requirements may be subject to civil penalties of up to $500 per day, and/or criminal penalties of up to two years imprisonment and a fine of up to $10,000. Note that these are the MAXIMUM amounts possible under the law.

Such "willful violations" could include things like failing to report complete or updated information or attempting to provide false for fraudulent beneficial ownership information. It could also include a person who is a beneficial owner refusing to provide the necessary documentation required to make a complete company filing.

Keep in mind though, that those harsh penalties are most likely for people who are willfully (that is intentionally and with forethought) violating the rules and laws. FinCEN states the following in their Small Entity Compliance Guide:

As a comparison, FinCEN enforces the Banking Secrecy Act, and for that their enforcement actions include:²⁶

• No action
• Warning letter
• Equitable remedies (injunction or equitable relieffor enforcedcompliance)
• Settlements (remedial undertakings and civil penalties)
• Civil money penalties
• Criminal referral

So civil and criminal penalties are likely to be a last resort.

More Resources

For additional information on the Beneficial Ownership Information reporting requirements, see the following:

• Beneficial Ownership Information (Financial Crimes Enforcement Network)
• Small Entity Compliance Guide (Financial Crimes Enforcement Network)
• Beneficial Ownership Information Reporting – Frequently Asked Questions (Financial Crimes Enforcement Network)
• US Code, Title 31, Section 5336, Beneficial ownership information reporting requirements.
• Code of Federal Regulations, Section 1010.380 Reports of beneficial ownership information.