Do I need to report beneficial ownership?

Maybe? 

Beneficial ownership information reporting, or BOI, might sound like a concept that only large corporations need to worry about, but it could apply to your small business, as well. Maybe your barber or brother-in-law mentioned it, leaving you puzzled. If so, you’re not alone. Let’s break it down.  

A federal district court in Texas issued a nationwide preliminary injunction against enforcing the beneficial ownership reporting requirements mandated by the Corporate Transparency Act (CTA). (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. Of Texas, Case No. 4:24-CV-478) 

You may say, “Great! Now I don’t need to do anything.” You could do that. The bigger question is whether the US Supreme Court (the final say) rules on the constitutionality of the Corporate Transparency Act (CTA). If they rule in favor, then a BOI needs to be filed. If they rule against it, then NO BOIs need to be filed. 

What Is BOI and Why Does It Matter? 

BOI involves companies disclosing details about individuals who own or control them—these are known as beneficial owners. This reporting promotes transparency, deters financial crimes, and ensures the integrity of financial systems. Under the Corporate Transparency Act of 2021, certain businesses must report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), not the IRS. 

Why Is This Important? 

Criminals often use complex corporate structures to mask their identities and the origins of illicit funds. BOI reporting helps law enforcement identify the true owners of companies, aiding in the fight against money laundering, tax evasion, and other crimes. 

Who Must Report? 

Most privately held corporations, LLCs, partnerships, and certain foreign corporations operating in the U.S. must file. Exceptions include: 

• Sole proprietorships 

• Publicly traded companies 

• Financial institutions 

• Nonprofits 

• Large operating companies meeting specific criteria 

What Information Is Required? 

You’ll need to provide: 

• Legal name 

• Residential address (no P.O. boxes) 

• Date of birth 

• Unique identification number (e.g., driver’s license or passport) and a corresponding image 

Changes, such as ownership transfers or new officer appointments, must be updated within 30 days. 

Defining Beneficial Owners 

Beneficial owners are individuals who: 

• Directly or indirectly own 25% or more of the company 

• Exercise substantial control (e.g., directors, senior officers) 

Even spouses with community property interests may count, depending on state laws. It’s better to include uncertain cases than risk penalties. 

Filing BOI 

Reports are submitted electronically via FinCEN’s website. Anyone authorized by the company can file, but many tax professionals avoid doing so, as it borders on legal practice. 

Currently, Penalties for Non-Compliance are On Hold. 

If the BOI filing is reinstated, failing to report can lead to: 

• Civil fines: Up to $500 per day 

• Criminal penalties: Up to $10,000 and/or two years imprisonment 

Safeguarding Your Data 

Access to BOI is restricted to authorized parties like law enforcement and regulators. The information is exempt from the Freedom of Information Act. 

Costs and Support 

While FinCEN charges no filing fee, third-party assistance (e.g., from attorneys) may incur costs. FinCEN offers resources, including FAQs and live chat support, to guide you. 

BOI reporting might feel overwhelming but deciding to file or not file is a necessary discussion. When in doubt, consult an expert at Lisa Brugman, EA and Associates for advice by clicking here.