Demystifying Beneficial Ownership Interest (BOI): Eligibility, Exclusions, and Filing Deadlines Explained
In the realm of financial regulations and compliance, the term “Beneficial Ownership Interest (BOI)” holds significant importance. Understanding who qualifies for BOI status, who doesn’t, and the pertinent filing deadlines is crucial for businesses and individuals navigating regulatory requirements. Let’s delve into what BOI entails and its key aspects for clarity.
What is BOI?
Beneficial Ownership Interest (BOI) refers to the ownership interest held by an individual or entity that ultimately benefits from or controls the ownership of a business, trust, or other legal entity, even if the ownership is not directly in their name. It’s a concept often utilized in anti-money laundering (AML) and know your customer (KYC) regulations to enhance transparency and combat illicit financial activities.
Who Is a Beneficial Owner of a Reporting Company?
Any individual who directly or indirectly exercises substantial control over the reporting company OR owns or controls at least 25% of its ownership interests is a beneficial owner. It’s possible a beneficial owner could have both substantial control and 25% or more ownership interests. A reporting company can have multiple beneficial owners and must report all of them in its BOI report.
What Does Substantial Control Mean?
Four general criteria determine if an individual has substantial control over a reporting company.
If an individual meets at least one of these criteria, they are a beneficial owner:
- The individual has a senior position of authority — e.g., President, Chief Financial Officer, Chief Executive Officer, Chief Operating Officer, General Counsel, or other title and similar responsibilities.
- The individual has the authority to appoint or remove any senior officer or a majority of the board of directors (or other governing body).
- The individual makes or influences important business and financial decisions by the reporting company.
- The individual has some other form of substantial control over the reporting company. (This is a catch-all criterion for any unique ways flexible company structures might allow individuals control over the business.)
What companies will be required to report beneficial ownership information to FinCEN?
Companies required to report are called reporting companies. There are two types of reporting companies:
- Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
Are some companies exempt from the reporting requirement?
Sole Proprietorships and General Partnerships are not required to report business ownership information because they are not registered legal entities.
In addition, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.
The following table summarizes the 23 exemptions:
| Exemption No. | Exemption Short Title |
| 1 | Securities reporting issuer |
| 2 | Governmental authority |
| 3 | Bank |
| 4 | Credit union |
| 5 | Depository institution holding company |
| 6 | Money services business |
| 7 | Broker or dealer in securities |
| 8 | Securities exchange or clearing agency |
| 9 | Other Exchange Act registered entity |
| 10 | Investment company or investment adviser |
| 11 | Venture capital fund adviser |
| 12 | Insurance company |
| 13 | State-licensed insurance producer |
| 14 | Commodity Exchange Act registered entity |
| 15 | Accounting firm |
| 16 | Public utility |
| 17 | Financial market utility |
| 18 | Pooled investment vehicle |
| 19 | Tax-exempt entity |
| 20 | Entity assisting a tax-exempt entity |
| 21 | Large operating company |
| 22 | Subsidiary of certain exempt entities |
| 23 | Inactive entity |
How to File Your Report
BOI reports will be filed electronically through FinCEN’s secure filing system. That system will be available starting January 1, 2024, and instructions for completing the BOI report form will be available on FinCEN’s website.
FinCEN is trying to make the beneficial ownership reporting as straightforward as possible. However, this is uncharted territory for business owners. If you need help determining whether your company is subject to the beneficial owner reporting requirements and who should be reported as beneficial owners, consider talking with your attorney, accountant, or FinCEN directly for guidance.
Initial Report
If your company existed before January 1, 2024, it must file its initial beneficial ownership information report by January 1, 2025.
If your company was created or registered on or after January 1, 2024, and before January 1, 2025, then it must file its initial beneficial ownership information report within 90 calendar days after receiving actual or public notice that its creation or registration is effective. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
If your company was created or registered on or after January 1, 2025, it must file its initial beneficial ownership information report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
Penalties for Not Reporting by the Deadline
A company could face civil penalties of up to $500 per day for each day beyond the report due date if it fails to provide complete and accurate BOI information. The willful failure or attempt to provide false or fraudulent beneficial ownership information could even result in criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.