Up to 2 years in prison and $10,000 in fines: a price startups might pay for skipping a 20-minute filing

What is it?

Simply put, BOIR is a report that reveals who controls the company and, in some cases, the person(s) who filed the incorporation documents.

Who should file?

Any company formed in the US, or any non-US company that registers to do business in the US, by filing a document with a government office, unless exempt.

There are 23 types of entities exempt from BOIR, including financial institutions, publicly traded companies, entities involved in private equity and venture capital, tax-exempt entities, and “large operating companies” (those with over $5M in gross receipts/sales for the last year, more than 20 full-time employees in the US, and a physical office in the US). Additional detail on each exemption, including specific required criteria, is provided by FinCEN in Section 1.2 of its Small Entity Compliance Guide (opens in a new tab).

Who needs to be disclosed?

It depends on your company’s incorporation date:

• Companies created before January 1, 2024, should disclose only their “beneficial owners”. A beneficial owner is someone who directly or indirectly owns or controls at least 25% of the company’s ownership interests or exercises ‘substantial control’ over the company.
  • An individual is considered to have substantial control if they are a senior officer (like a CEO, President, General Counsel, CFO, or COO), can appoint or remove officers or majority of directors, or significantly influences key business decisions, financing, or company structure.
  • FinCEN also includes a ‘catch-all’ provision for those with “any other form of substantial control.” In the absence of clear guidance on this, it is up to the company to determine who to report as beneficiaries.
  • The ownership interest criteria extends beyond equity, stock, or voting rights to capital or profit interests, options, and convertible instruments. For example, if someone is entitled to get 25% or more of the profits, they should be disclosed as a beneficiary. Additionally, If an individual owns or controls more than 25% of a reporting company through one or more entities, the company must disclose only that individual, and not the intermediate entity. Special exceptions apply, such as (i)when ownership is held entirely through an exempt entity (i.e., entity not obligated to disclose its beneficiaries), or (ii) when the same individuals are the beneficial owners of both the reporting company and the intermediate entity (for more details, please refer to FinCEN’s BOI FAQ here).
• Companies created on or after January 1, 2024 must also disclose ‘company applicants,’ meaning those who filed or controlled the filing of the incorporation documents. While the direct filer should always be disclosed, the person controlling the filing must be reported only if several people were involved in the filing process. Each company will have at least one and a maximum of two company applicants. If the company hires a law firm to assist with its formation by coordinating the filing through a corporate formation service, an individual from the law firm may be listed as the company applicant. Identifying the second company applicant will need to be determined on a case-by-case basis.

How do you file?

Visit https://boiefiling.fincen.gov/fileboir and choose between online filing and uploading a PDF prepared offline. You’ll need the company legal name, jurisdiction of formation, tax identification number, and address. For each beneficiary and company applicant, provide the full name,  date of birth, current address, and a photo of an official ID (like a state-issued driver’s license or passport). Watch out for typos, errors will necessitate filing an amended report!

As an alternative to collecting and submitting sensitive personal information for individuals required in the company’s BOI report, those individuals can obtain a “FinCEN identifier” directly from FinCEN.

FinCEN identifier

The reporting company can then include the FinCEN identifier in its BOI report instead of the individual’s personal details. FinCEN identifiers are particularly useful for individuals who serve as company applicants or beneficial owners for multiple companies, such as VCs. Individuals must generally keep the information provided to FinCEN (e.g., address details) up to date to maintain their FinCEN identifier.

Individuals can create an account and apply for a FinCEN identifier through the FinCEN ID application platform. The identifier is automatically generated once a complete application is submitted. Reporting companies may want to encourage beneficial owners to obtain FinCEN identifiers to reduce the amount of sensitive personal information they need to collect and submit directly to FinCEN with their BOI reports.

When do you file?

Deadlines for initial BOIR filings are:

• Existing companies as of January 1, 2024, must file by the end of 2024;
• Companies incorporated in 2024 have 90 calendar days post-incorporation to file, but effective January 1, 2025, the deadline shortens to 30 days.
• If any information disclosed in the BOIR changes, companies have 30 days to file an updated report.

There is a safe harbor from penalties for filing incorrect or inaccurate BOI reports, provided that the report is corrected within 90 days of when it was filed.

What if we don’t file?

FinCEN warns that willful failure to report or submitting false information can result in hefty fines, including civil penalties of up to $500 per day, up to two years of imprisonment, or a $10,000 criminal fine. Beneficiaries may face personal liability for the company’s failure to file BOIR, especially if they withhold required information.

Don’t let non-compliance cost you. Stay informed and take action to meet your BOIR obligations! If you need help submitting the initial BOI report or making updates on your behalf, feel free to reach out.

Note:

A federal district court ruled the CTA unconstitutional as of March 1, 2024. FinCEN has paused enforcement of the CTA for the plaintiffs involved in this case. FinCEN announced an appeal on March 11, 2024. While the appeal's outcome is pending, the ruling's broader impact is unclear, though FinCEN suggests it will continue CTA enforcement for non-plaintiffs. The following content was created before the ruling, assuming the CTA's enforceability.