How To File a Beneficial Ownership Report: The Ultimate Guide

The world of financial regulations can feel complex, especially for new business owners. One recent regulation, the Corporate Transparency Act (CTA), has caused some confusion regarding the filing of Beneficial Ownership Reports (BOIRs).

This guide will explain everything you need to know about filing a BOIR, from who needs to file to the required information and the submission process. 

Plus, you'll get an inside look at Paystubsnow's services, which are designed to make the filing of beneficial ownership information as straightforward and efficient as possible.

Main Takeaways From This Article: 

  • Beneficial Ownership Reports are crucial legal documents required to ensure the business's compliance with financial regulations that deter fraud and money laundering.
  • These reports require specific information about individuals who exercise substantial control over a company. This can include data about those involved in significant business, financial, and structural decisions within the organization.
  • With the right knowledge and guidance, the reporting process can be successfully navigated, from knowing who needs to file to understanding the required information, meeting submission deadlines, and avoiding common mistakes.
  • Changes to or inaccuracies in reported information must be addressed promptly to maintain compliance and avoid potential penalties.
  • Paystubsnow offers document generation services that can help streamline the creation of accurate, compliant Beneficial Ownership Reports, making the entire process more manageable for businesses of all sizes.

Understanding Beneficial Ownership and the Corporate Transparency Act

a person using a magnifying glass to look at paperwork

In the world of business, ownership structures can be complex. While official records might show one person or entity as the owner of a company, someone else might be "pulling the strings" behind the scenes. This is where the concept of beneficial ownership comes in.

A beneficial owner is an individual who ultimately controls or owns a significant portion of a company, even if their ownership isn't reflected in official documents like stock certificates or company filings. This control can be exercised directly (through ownership of shares) or indirectly (through complex ownership structures like trusts or holding companies).

The US Corporate Transparency Act and FinCEN Rules

The US government, concerned about the potential for misuse of complex ownership structures for illegal activities like money laundering and terrorist financing, enacted the Corporate Transparency Act (CTA) on January 1st, 2021.

This act, which came into effect on January 1st, 2024, aims to increase transparency around corporate ownership by requiring certain businesses to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). FinCEN, a bureau within the US Department of the Treasury, is responsible for combating financial crimes and plays a key role in enforcing the CTA's regulations.

FinCEN has established specific rules outlining who needs to file a Beneficial Ownership Information Report (BOIR), the information that must be included in the report, and the filing deadlines. These rules are designed to create a comprehensive database of beneficial owners, allowing law enforcement and other authorized parties to identify the true owners of reporting companies and detect potential financial crimes.

Who Needs To Report Beneficial Ownership Information?

Not all businesses are required to file a BOIR. Here's a breakdown of who needs to comply:

  • Newly Formed Domestic Entities: This includes startups, corporations, limited liability companies (LLCs), and similar business structures established in the US.
  • Certain Existing Domestic Entities: Existing businesses may also be subject to filing if they convert to a different business structure or experience a significant change in ownership.
  • Foreign Companies Registered to Do Business in the US: This includes branches or subsidiaries of foreign companies operating in the US.

It's important to consult with a legal or financial professional to determine definitively whether your company falls under the CTA's reporting requirements. For instance, publicly traded companies don't come under the CTA, as they are subject to their own reporting requirements. 

Required Information for Filing

an open filing cabinet with many files inside

Filing a Beneficial Ownership Information Report (BOIR) requires gathering and disclosing specific details about your company and its beneficial owners. 

Here's a breakdown of the information you'll need:

1. Reporting Company Information

  • Full Legal Name: This should be the exact name your company is registered under with the secretary of state in the state where your business was formed. For this information, double-check official documents like your Articles of Incorporation or Certificate of Formation.
  • "Doing Business As" (DBA) Names: Also known as fictitious business names, DBAs are alternative names your company uses for marketing or customer service purposes. If you operate under any DBAs, list them all here. Keep in mind that DBA registration requirements vary by state, so ensure your DBAs comply with local regulations.
  • US Address: Provide your company's physical address in the United States. This should be the address associated with your business operations, not necessarily a mailing address or PO Box.
  • Taxpayer Identification Number (TIN): This is your company's federal tax identification number, also known as an Employer Identification Number (EIN). You'll need your EIN for various tax purposes, including filing your business tax return. If you haven't obtained an EIN yet, you can apply for one for free through the IRS website.

2. Beneficial Owner Information

For each beneficial owner of your company, you'll need to disclose the following:

  • Full Legal Name: This should be the first and last name of the individual who is a beneficial owner.
  • Date of Birth: Record the beneficiary's date of birth.
  • Current Address: Provide the beneficiary's current residential address.
  • Unique Identifying Number: This is used to verify the identity of the beneficial owner. It can be:
    • A US passport number
    • A US driver's license number
    • A non-expired identification document issued by a US state, territory, or local government
    • (For foreign owners without the above) A non-expired foreign passport number
  • Ownership Percentage: Specify the percentage of ownership each beneficial owner holds in the company. This could be a direct ownership stake or an indirect ownership stake through another entity.
  • Date Acquired Ownership: Record the date on which the beneficial owner acquired their ownership percentage in the company.

Gathering and Verifying Data

Collecting this information can require some effort, especially for companies with multiple beneficial owners. Here are some tips to streamline the process:

  • Maintain Accurate Ownership Records: Having up-to-date shareholder agreements, partnership agreements, and other ownership documents is essential.
  • Communicate Clearly With Beneficial Owners: Inform them about the reporting requirements well in advance of filing deadlines. Provide a clear explanation of the information needed and request their cooperation in gathering the required details.
  • Utilize Reliable Identification Verification Methods: Verify the information provided by beneficial owners by verifying their identification documents. Consider using secure online services for identity verification or requesting physical copies of identification documents for your records (following relevant data privacy regulations).

By taking these steps, you can ensure you have all the necessary information for your BOIR and avoid potential delays due to missing or inaccurate data.

Deadlines and Submission Process

a person holding a pen, circling a date on a calendar

Meeting filing deadlines is crucial to avoid penalties for non-compliance with the Corporate Transparency Act (CTA). Here's a breakdown of key deadlines and a guide to the submission process.

Deadlines

  • Newly Formed Entities: If you're a newly formed business entity in the US (corporation, LLC, etc.), you have 30 days from the date you file your formation documents with the secretary of state to submit your BOIR.
  • Existing Entities: Existing businesses that fall under the CTA's reporting requirements have a grace period. You have two years from the enactment of the CTA (January 1, 2023) to file your initial report.

Submission Process

There are two ways to submit your BOIR:

  • Electronically: This is the preferred method as it's faster, more secure, and allows for easier record-keeping. FinCEN offers a dedicated BOI E-Filing System that is accessible through its website: https://www.fincen.gov/boi.
  • Paper Form: Paper forms can also be downloaded from the FinCEN website. However, mailing them is more time-consuming and prone to errors.

Here's a step-by-step guide for electronic filing:

  1. Register for an Account: Visit the FinCEN BOI E-Filing System and create a user account.
  2. Gather and Prepare Information: Make sure you have all the required information about your company and beneficial owners readily available (as outlined in the previous section).
  3. Start a New BOIR: Within the E-Filing System, initiate a new BOIR for your company.
  4. Enter Company Information: Fill in the details about your reporting company, including legal name, DBA name, address, and TIN.
  5. Add Beneficial Owners: For each beneficial owner, enter their full legal name, date of birth, current address, unique identifying number, ownership percentage, and date of acquisition.
  6. Review and Submit: Carefully review all information for accuracy before submitting the completed BOIR electronically.

Tips for Maintaining Records

Once you submit your initial BOIR, it's important to maintain accurate records and update your report as needed. Follow these tips:

  • Keep Copies of Documentation: Maintain copies of your BOIR and all supporting documents (ownership agreements, identification verification documents) for at least five years.
  • Report Changes: Any changes to your company's beneficial ownership structure (e.g., new owner, changes in ownership percentages) must be reported to FinCEN within 30 days of the change. You can update your existing BOIR through the FinCEN E-Filing System.

By understanding the deadlines, using the appropriate submission method, and following best practices for record-keeping and updates, you can ensure your company remains compliant with the CTA's BOIR requirements.

Avoiding Common Mistakes in Beneficial Ownership Information Reporting

hands highlighting parts of a document in red

While filing a BOIR, some errors can trip you up if you're not careful. Here's a breakdown of typical errors businesses make during the filing process: 

  • Incomplete or Inaccurate Information: This is the most frequent error. Double-check all details pertaining to beneficial owners, including names, dates of birth, addresses, ownership percentages, and identification numbers. Ensure they are accurate and match official documents.
  • Missing Deadlines: Penalties can be imposed for late submissions. Companies must file within 90 days of receiving actual or public notice that attests to the company's creation or registration. Mark deadlines clearly in your calendar and start collecting information well in advance to avoid last-minute scrambling.
  • Incorrect Filing Method: While paper forms are an option, electronic filing is the preferred method. It's faster, more secure, and simplifies record-keeping.
  • Not Keeping Records: It is essential to maintain copies of your BOIR and supporting documentation (ownership agreements, identification verification) for at least five years. This demonstrates your compliance efforts and allows for easy updates if needed.
  • Failing to Report Changes: Remember, the CTA requires reporting any changes to your company's beneficial ownership structure within 30 days. This includes adding new beneficial owners, changing ownership percentages, or removing existing owners.

To steer clear of these errors and ensure accuracy and compliance during the filing process, implement these best practices:

  • Gather Information Early: Don't wait until the last minute to collect information from beneficial owners. Start early to avoid any last-minute scrambling and potential delays.
  • Communicate Clearly: Inform beneficial owners about their reporting obligations and the information you require well in advance. Provide clear instructions and answer any questions they might have.
  • Maintain Clear and Organized Records: Having up-to-date ownership agreements, shareholder records, and beneficial owner contact information is essential. This ensures you have everything readily available when filing your BOIR and for any future updates.
  • Seek Professional Assistance if Needed: If your company's ownership structure is complex, consider consulting with an attorney or accountant specializing in corporate compliance. They can guide you through the filing process and ensure you meet all legal requirements.

Timely filing and maintaining accurate records are crucial for avoiding penalties and contributing to a more transparent financial environment.

Enhance Your Compliance Reporting With Paystubsnow

Navigating the complexities of reporting beneficial ownership information can be challenging, especially for businesses with intricate ownership structures. Reliable resources can help streamline this process and ensure compliance with all legal requirements.

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