Frequently-Asked Questions

Is every small businesses required to file the Beneficial Ownership Information Report (BOI)?

No, the Corporate Transparency Act (which governs the BOI) impacts only a portion of American businesses. In the broadest terms, six questions define the general scope of whether a business must file.

However, these questions only serve as a general framework for determining the requirement to file. Do not rely on your initial response to them as the final word on the matter. On deeper evaluation, specific situations related to your business may alter the extent to which your first impression proves correct.

Other FAQs on this page address these questions more fully.

What determines whether a small businesses is regarded as a legal entity?

By definition, a legal entity is one which was established by filing required paperwork and receiving approval from the secretary of state (or equivalent) in a U.S. state, territory, or native American tribe, or a similar process in a foreign jurisdicion. Since sole proprietorships do not typically go through this registration process, they are usually not considered "legal entities" and are thus exempt from the Beneficial Ownership Information Report.

Who is considered a beneficial owner?

In daily speech, we use the word "owners" to denote those who have ultimate financial and legal control of a company. For the Beneficial Ownership Information Report, ownership takes on much broader meaning.

Guidance for filing the report prescribes two types of beneficial owners. First are those who individually control 25% or more of the company's shares or voting rights. Second are people who do not necessarily own shares, but who have "substantial control" of the company.

Unfortunately, the meaning of "substantial control" is rather imprecise.

By virtue of their office, certain C-Level executives (but not all) are classified as having substantial control. This includes Presidents, CFOs, CEOs, COOs, and General Counsels (or anyone filling equivalent functions). Beyond this, however, the definition of a substantial control is somewhat ambiguous.

For instance, (to quote the regulation directly) anyone "who directs, determines, or has substantial influence over important decisions" is a benefical owner. This wording shifts the emphasis from "substantial control" to "substantial influence" and from overall control to "important decisions."

But what exactly does "substantial influence" mean? And what constitutes an "important decision"? The regulations do not specify. Instead, BOI guidelines offer illustrative examples of actions which would indicate substantial influence over important decisions.

Among these indicators are things like choosing geographic areas of focus; selecting or terminating lines of business; entering or terminating significant contracts; authorizing major expenditures; incurring significant debt; or selling, leasing, or transfering principal assets.

Again, however, there's no explanation of what qualifies as a "significant contract" or "significant debt." Nor is there any guidance on how to interpret phrases like "major expenditure" and "principal assets."

One additional point should be taken into account. To be regarded as a beneficial owner, it is only necessary for a person to have "significant" decision-making authority, without regard to whether the individual actually exercises that authority in the normal rhythms and routines of the organization.

Given so many imprecise guidelines, it's easy to see why many who file may find it wise to utilize the built-in guidance of Compliance BOI's SafeFile System™ or to seek the opinion of a qualified business attorney before deciding who should be included in their report.

Who is a company applicant?

The name of your company applicant or applicants is required in a BOI report only for companies formally established on or after January 1, 2022.

Company advocates are individual(s) who submitted formal documents to gain official recognition of an entity from a U.S. state, territory, or Indian tribe.

BOI regulations require you to identify the person who had direct responsibility for the filing, as well as the person most fully assisted materially in the application (such as an admin assistant who prepared the forms). No more than two company applicants are to be included.

What classifies a company as inactive?

To be treated as inactive under BOI reporting rules, a company must meet seven criteria completely.

Must I report if my company only has passive income?

Reporting requirements for the Beneficial Ownership Information Report make no distinction between passive and earned income. Total annual revenue is the only income consideration for determining the need to file.

Do I have to report if my company operates at a loss?

Profitability has no bearing on reporting requirements for the Beneficial Ownership Information Report. A company must file unless it meets the qualifying criteria as an inactive entity or has wrapped up its affairs and has been fully dissolved legally.

Is there a grace period for filing?

At present, the government has not announced a grace period, nor are there indicators that an announcement is imminent. For companies who experience catastrophic loss of records in a storm or fire, there are provisions to apply for a delayed filing. But there is no general provision, apart from such catastrophes, for requesting postponement.

What are the penalties for not filing or for filing improperly?

Unfortunately, penalties for non-compliance are steep. Starting January 2, 2025 the Treasury Department can impose a civil penalty of $500 per day on non-filers. In the event of willful non-compliance, fradulent filings, or gross misrepresentations on the BOI report, criminal charges can be brought. These can result in fines of up to $10,000 and/or imprisonment for up to two years.

How stringently the Treasury Department will levy civil and criminal penalties is yet to be seen. But given the teeth in this law, our advice is to avoid making yourself a test case.

Can I group several companies into one report?

No, every company must file individually, even those with identical beneficial owners and operating locations. Compliance BOI provides special discounts for using our service to file four or more BOI reports.

What kinds of companies are exempt from filing the Beneficial Ownership Information Report?

Under the Corporate Transparency Act (CTA), sole proprietorships have no reporting requirement, even if they use a DBA or assumed name.

The Treasury Department provides nearly two dozen exemptions from the BOI Report. First, automatic exemptions extend to companies with more than 20 fulltime employees AND whose revenue for the preceding year exceeded five million dollars.

Second, while even inactive companies must report, some are exempt. See the FAQ on "What Classifies an Entity as Inactive?"

Exemptions also apply to certain categories of companies. Each category has detailed exemption criteria. The categories include:

1. Governmental Authorities
2. Banks
3. Credit Unions
4. Large Operating Companies
5. Securities Reporting Issuers
6. Depository Institution Holding Companies
7. Money Transmitter or other Service Businesses
8. Brokers or Dealers in Securities
9. Other Exchange Act Registered Entities
10. Securities Exchanges and Clearing Agencies
11. Investment Companies or Investment Advisers
12. Insurance Companies
13. State-licensed Insurance Producers
14. Commodity Exchange Act Registered Entities
15. Public Accounting Firms
16. Public Utilities
17. Financial Market Utilities
18. U.S. Pooled Investment Vehicles
19. Tax-Exempt Entities
20. Entities Assisting a Tax-Exempt Entity
21. Subsidiaries of Certain Exempt Entities
22. Venture Capital Fund Advisers

What changes require an updated BOI report to be filed?

Two types of changes require a company to file an updated BOI report, in most cases within 30 days. First are certain changes in the life of an individual beneficial owner. Second is a change in the overall beneficial ownership structure of the company.

Personal Changes to Be Reported

• any change in residential address
• a name change due to marriage
• restoration of a former name after a divorce or annulment
• a court decree granting a new name
• replacement of the ID currently on file with FINCEN
• death of the beneficial owner

Corporate Changes to Be Reported

• promotions or realigned duties that change the beneficial ownersip profile of the company
• resignations, retirements, or terminations of beneficial owners
• changes in voting rights
• transitions of beneficial owners into roles not deemed to meet the criteria for beneficial ownership
• addition of beneficial owners through inheritance or action of a court
• purchases or grants of equity which give an investor at least 25% of the entity's financial ownership or voting rights
• in community property states, the marriage or divorce of an investor with at least 25% ownership of the entity; or the death of the investor's spouse
• mergers, acquisitions, or reorganizations which alter the makeup of the entity's beneficial ownership
• attainment of majority by a minor who is a beneficial owner

What's the best way to handle ambiguous guidance in the BOI instructions?

First, of course, use the resources on this website and the interactive help features of the SafeFile System™ to resolve the matter. Also research your question on the FINCEN website.

Second, if you consider the matter important enough to justify the investment, you should seek legal counsel, either on your own or through our attorney referral service. The Treasury Department estimates that up to 19% of the companies who report will need legal counsel in preparing their input.

Yet, truth be told, some ambiguous issues related to the BOI have no definitive resolution. Even with our expertise in the Beneficial Ownership Information Report, we encounter scenarios for which there is either no guidance at all or no genuine clarity in the guidelines. Hopefully, future revised rules or court opinions will give us more direction on how to handle such cases.

If I need legal counsel to complete my report, can Compliance BOI supply an attorney?

Compliance BOI does not perform legal services itself, but with your authorization, we can act as your agent to consult an attorney for a legal opinion on your issue.

Or if you prefer, we can reefer you to an attorney. You would then contact the attorney directly.

In any event, whether you consult your own legal counsel, authorize Compliance BOI to act as an agent on your behalf, or contract with an attorney to whom we refer you, the decision to draw on the advice of legal counsel or forego it altogether is entirely yours. We will process your report, regardless of your decision about attorney advice.

What is the advantage of filing with Compliance BOI?

We designed our SafeFile System™ and its Smart Screen Technology to provide distinct benefits as your best filing platform for the Beneficial Ownership Information Report.

What is FinCEN?

References to FinCEN appear regularly in guidance for the Beneficial Ownership Information Report. FinCEN is an acronymn for the Financial Crimes Enforcement Network. It's the enforcement arm of the U.S. Treasury Department for monitoring compliance with the Corporate Transparency Act (CTA) in general and the Beneficial Ownership Information Report specifically.

Why did Congress pass the Corporate Transparency Act (CTA)?

Drug cartels and terrorist groups have mastered the art of using shell companies to launder money or fund activites which endanger national security.

In January 2021, the Defense Appropriation Bill addressed this threat with legislation known as the Corporate Transparency Act (CTA).

One aim of the CTA is to track control of small businesses, because criminal enterprises commonly use this kind of structure to disguise themselves as legitimate, low-profile companies. The Beneficial Ownership Information Report serves as a CTA tracking mechanism.

The BOI is administered through the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department.

Why have we heard so little about the Beneficial Ownership Information Report?

Because of how it was packaged, the law creating the BOI Report passed Congress somewhat unnoticed. As Congress has been prone to do in recent decades, it combined the law with several others and voted on them as one massive piece of legislation.

In this case, the legisation was the 2021 Defense Appropriation Bill, which was over 3000 pages long. Within the bill, the Corporate Transparency Act authorizing the BOI Report filled a mere 15 pages. At the time, even members of Congress gave it little notice.

Toward the end of 2023, the Treasury Department released guidelines and announced a process for submitting the report. But for an initiative of this magnitude, promotional publicity has been somewhat meager. As result, awareness of has spread largely by word of mouth.

Do court challenges to the Corporate Transparency Act reduce the urgency to file?

Although legal challenges to the Corporate Transparency Act (CTA) have made their way into the courts, final adjudication of these cases is unlikely prior to BOI report deadline of January 1, 2025. In the meantime, the importance of meeting the deadline remains undiminished.

At the time of this posting, the Treasury Department has announced that it will continue to enforce BOI policies while legal challenges to the CTA are pending or under appeal.

Thus, there is notable risk in not filing out of hope that courts will either overturn the CTA or partially invalidate it. Should the CTA withstand court challenges, your purposeful decision not to file puts you in jeopardy of severe penalties for willful non-compliance with the law.

What if Congress revokes the Corporate Transparency Act?

Apart from the courts, only Congress can amend or terminate provisions of the CTA, which passed with bi-partisan support. And since the CTA specifically provided for so many specifics of the BOI reporting process, the process is unlikely to change significantly without new legislation by Congress. Whatever the odds that Congress might revise or revoke the CTA at some point in the future, it is unlikely to do so prior to the end of 2024, especially given the distraction of a presidential election year.

Therefore, small business owners should expect no relief from Congress on complying with the Beneficial Ownership Information reporting requirements.