Recent legal developments have once again changed the status of Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act (CTA). While the requirement to file was initially extended from January 1, 2025, to January 13, 2025, a new federal court ruling on December 27, 2024 has temporarily halted the obligation to file BOI reports altogether. Here’s what you need to know.
If you own, run, or are starting a U.S.-based corporation or a foreign-owned company registered to do business in the U.S., it’s critical to understand whether this law affects you—and the steps you may need to take to maintain compliance if the BOI requirements change again. Read on to find out whether the law applies to your business, what information you’ll need to disclose and answers to other common questions about BOI reporting.
What is a Beneficial Owner?
A beneficial owner is any individual who directly or indirectly owns 25% or more equity interest in a reporting company. For example, if you own 30% of a limited liability company (LLC), you would be subject to the beneficial ownership information reporting rule.
The term “beneficial owner” also includes anyone with substantial control over the reporting company. Senior company officers, such as the company’s president, CEO, CFO, general counsel and anyone with significant decision-making ability, can fall into this category.
To help businesses identify beneficial owners accurately, FinCEN has compiled a Small Entity Compliance Guide with detailed checklists and examples.
Why is Beneficial Ownership Reporting Required?
More than 2 million corporations and LLCs are formed annually in the United States, but most states have historically required little, if any, information about their beneficial owners. This lack of regulation made it easy for bad actors to use anonymous shell companies for illicit and illegal activities like money laundering and securities fraud.
Congress passed the Corporate Transparency Act in 2021 with the aim to improve corporate transparency by requiring companies to disclose beneficial ownership information. In turn, this regulation should help investigators trace financial crimes while also increasing accountability for corporate owners.
Current Status of BOI Reporting
As of December 26, 2024, businesses are not currently required to file BOI reports with FinCEN due to a federal court order issued in the ongoing case of Texas Top Cop Shop, Inc. v. Garland, where courts are evaluating whether the Act’s requirements are constitutional. The injunction temporarily stops enforcement of the reporting requirement. That said, businesses can voluntarily submit their BOI reports, which may be a good idea since the decision and deadline could change at any time.
This legal pause comes after a series of recent developments:
- Early December 2024: A preliminary injunction was issued, stopping the requirement to file BOI reports.
- December 23, 2024: The injunction was briefly overturned by the Fifth Circuit Court of Appeals, reinstating the reporting requirements and extending the deadline to January 13, 2025.
- December 26, 2024: A new panel of the Fifth Circuit vacated the stay, reinstating the preliminary injunction and suspending the filing requirement.
The ongoing legal activities leaves the future of BOI reporting uncertain, and additional rulings could quickly change the requirements again. For now, you should continue to monitor updates closely.
Which Businesses Would Be Required to Report?
If the filing requirement becomes law of the land again, most domestic and foreign corporations and LLCs engaged in U.S. commerce must comply with BOI reporting.
However, the Act does make exceptions for specific business entities who already report their ownership information elsewhere, including:
- Publicly traded companies
- Federal, state and local government agencies
- Banks, credit unions and securities brokers/dealers
- Investment companies and advisers
- Insurance companies
- Accounting firms
- Tax-exempt entities (like non-profits)
In addition, large private companies with over 20 full-time U.S. employees, over $5 million in gross receipts or sales and an operating presence at a physical office in the U.S. are exempt from reporting requirements if they simultaneously meet all of these criteria.
Refer to FinCEN’s detailed list of the 23 types of exempt entities to confirm whether your business qualifies for an exemption.
What Information Do You Need to Report on Beneficial Owners?
To report your company’s beneficial owners, you need to provide specific identifying details to FinCEN on their official BOI form. Have the following information about your beneficial owners ready before you file your report:
- Full legal name
- Date of birth
- Current residential address
- Unique identifying number from an acceptable identification document
Acceptable identification documents include passports and U.S. driver’s licenses. They have to include the issuing state’s name or jurisdiction. Reporting companies also have to submit an image of the identification document.
You’ll also need to submit details about the reporting company itself, including:
- The full legal business name
- Any “doing business as” (d/b/a) or “trading as” (t/a) names
- Your company’s current street address
- The jurisdiction where you initially formed the business
- Your business tax identification number (TIN)
Foreign reporting companies should report the address they conduct their business from in the U.S. and a tax identification number issued by a foreign jurisdiction (along with the name of the jurisdiction).
How Do You Submit the Beneficial Ownership Forms?
Submit all BOI reporting directly to FinCEN through their secure online reporting system. You should expect to register your business through the FinCEN portal and create a login tied to your entity.
What are the Penalties for Not Reporting Beneficial Ownership Information?
Currently, businesses face no penalties for not filing BOI reports due to the court-ordered injunction. If the requirement is reinstated, however, individuals and corporate entities who intentionally fail to report BOI or file false information could face significant penalties, including:
- Civil penalties: Up to $591 per day, adjusted for inflation
- Criminal penalties: Up to $10,000 in fines and up to two years in prison
To avoid these consequences, businesses should prepare their information now in case of change while staying informed about any changes to the filing requirements.
Can You Make Beneficial Ownership Information Private?
The Corporate Transparency Act requires FinCEN to maintain confidentiality around beneficial ownership information reporting, so your company’s ownership details will not be shared openly or published publicly. FinCEN will store all beneficial ownership information in a secure, non-public database that follows Federal guidelines for sensitive information security. Access is limited to:
- Authorized federal and state law enforcement agencies
- Financial institutions (with the reporting company’s consent)
Work with Paro to Stay Ahead of BOI Reporting
Although the filing requirement is temporarily paused, now is the time to prepare for potential changes. At Paro, we stay on top of regulatory updates so you don’t have to.
Our compliance experts can help you assess whether your business would need to comply and ensure you’re ready to file if the BOI reporting requirements are reinstated with a new deadline. Schedule a consultation today to get the support you need to stay ahead of changing requirements.
