Starting January 1, 2024, many small businesses will be required to file a Beneficial Ownership Information (“BOI”) Report (“BOI Report”) with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”); FinCEN is a bureau of the U.S. Treasury, which monitors illegal activity in the financial system. This new requirement was brought under the Corporate Transparency Act (“CTA”), an anti-money laundering statute which “establishes uniform beneficial ownership information reporting requirements for certain” companies, and requires FinCEN to collect that information.
What Is a “Beneficial Owner”?
A beneficial owner is: “any individual (1) who directly or indirectly exercises "substantial control" over the reporting company, or (2) who directly or indirectly owns or controls 25 percent or more of the ‘ownership interests’ of the reporting company.” FinCEN utilizes a broad definition for defines “substantial control” and “ownership interests.”
Whether an individual has ‘substantial control’ over a reporting company depends on the power they may exercise over a reporting company. For example, an individual will have substantial control of a reporting company if they direct, determine, or exercise substantial influence over, important decisions the reporting company makes. In addition, any senior officer is deemed to have substantial control over a reporting company. Other rights or responsibilities may also constitute substantial control.
"Ownership interests" generally refer to arrangements that establish ownership rights in the reporting company, including simple shares of stock as well as more complex instruments.
Compliance with the BOI Report Filing Regulations
The original Corporate Transparency Act (CTA) required most domestic companies created before January 1, 2024, to file their Beneficial Ownership Information (BOI) Reports by January 1, 2025, with certain new companies required to file within 30 days of formation. However, this framework has changed.
In March 2025, FinCEN issued an interim final rule revising the filing requirements. Under the updated rule, most U.S. entities are now exempt from BOI reporting, and the filing deadlines have been extended. This means that many businesses that were previously preparing to submit BOI reports no longer need to do so.
What Is a “Company Applicant”?
According to FinCEN, a company applicant is one of two individuals: (1) “the individual who directly files the document that creates, or first registers, the reporting company; and (2) the individual that is primarily responsible for directing or controlling the filing of the relevant document.”
Failure to Comply with the BOI Reporting Regulations
According to the CTA failure to comply with the BOI Report filing regulations can result in a fine of five hundred dollars ($500) for each day that the filing is late. Willfully providing, or attempting to provide, fraudulent information on a BOI Report can result in a fine of up to ten thousand dollars ($10,000) or up to two (2) years imprisonment. Further, those who make unauthorized use of BOI information may be subject to fines of five hundred dollars ($500) for each day the unauthorized use continues, up to two hundred fifty thousand dollars ($250,000), or imprisonment for up to five (5) years.
