Do you need to report beneficial ownership? Here’s how

You may have heard about a new regulation that requires companies to provide Beneficial Ownership Information about their company. The Corporate Transparency Act, passed in 2021, requires many companies to disclose who has an ownership stake in their company. To do this, companies must file a Beneficial Ownership Information report. The purpose of beneficial ownership reporting is to prevent bad actors from using shell companies to hide or disguise ill-gotten gains.

The Financial Crimes Enforcement Network, or FinCEN, part of the US Treasury Department, collects the required beneficial ownership information. FinCEN began collecting this information in January 2024, and existing companies that are required to report must do so by the end of 2024.

Here's what you need to know about reporting Beneficial Ownership Information.

What is beneficial ownership?

Beneficial ownership refers to those people who benefit from their ownership in a company. The beneficial ownership information that businesses are required to report is identifying information about all owners of the company who receive some kind of benefit from their ownership.

A beneficial owner is someone who owns or controls at least 25% of the company’s interests or who exercises substantial control over the company, either directly or indirectly. Someone who exercises ‘substantial control’ can be a senior officer, someone with the authority to appoint or remove officers or directors, an important decision maker, or someone with another form of significant control. The definition of substantial control is detailed in the FinCEN Small Entity Compliance Guide.

Which businesses must report beneficial ownership?

If your business is a U.S. corporation, a limited liability company, or any other entity created by filing a document with the secretary of state or a similar office, you are probably required to report beneficial ownership information.

There are 23 types of companies that are not required to report beneficial ownership, including accounting firms, investment advisors, tax-exempt entities, and others. (Most of these exempt entities are regulated by organizations that already require information on beneficial owners.) FinCEN provides a complete list of exempt companies on its website.

Sole proprietors are exempt if they did not file with the secretary of state or another similar office to create their business.

The information businesses are required to report includes each beneficial owner’s name, address, date of birth, and identification, such as a driver’s license or passport.

Related: A 7-point checklist for a successful business partnership

When must beneficial ownership be reported?

If your company was operating (that is, created or registered to do business) as of January 1, 2024, you have until January 1, 2025 to file your BOI report. If your company was or will be created or registered in 2024, you have 90 days from the date you receive notice your company was created or registered to file your BOI report. Companies that are created or registered after January 1, 2025, have 30 days from the date they are notified of the company’s registration.

A business only needs to report beneficial ownership information once, unless it changes. If a new beneficial owner is added to the business, the correction to the report must be made within 30 days of the change.

How can a business report beneficial ownership?

Reporting beneficial ownership is easy, and most businesses can do it in a few minutes. You can report through the FinCEN website. You will need the name, address, date of birth, and identification number (from a driver’s license, passport, or other government-issued ID) for each beneficial owner. There is no fee to file your beneficial ownership information report.

If your business structure is complex, you may wish to consult your accountant or attorney to determine all beneficial owners.

Email fraud alert

If you receive an email asking for beneficial ownership information for your business, with a link or QR code to click, do NOT click on it. These emails are fraudulent. FinCEN does not proactively reach out to businesses, nor does it send unsolicited requests for information. And you do not have to pay someone to report beneficial ownership for you – you can do it yourself, quickly and easily.

The preceding content is for general informational purposes only and is not intended to provide legal or other professional advice. For specific information about your obligations regarding beneficial ownership information reporting, consult the FinCEN Small Entity Compliance Guide.