Owners of U.S. Companies Need to Learn How to Avoid a $500/Day Fine

Did you know that: (1) the Corporate Transparency Act, a federal law that became effective January 1, 2024, requires almost all U.S. companies to file a report with the Financial Crimes Enforcement Network of the U.S. Treasury (“FinCEN”) that discloses information to FinCEN about the company and its owners, (2) reports that are filed late are subject to a $500 a day fine, and (3) willful failure to file or willfully filing false information can be punished by up to two years in prison?

The most important articles in the list below you should read if you have a reporting company and may file the report yourself are:

18. Can a beneficial owner or company applicant be held liable for refusing to provide required information to a reporting company?

19. Should you file a reporting company’s FinCEN BOI report or hire a third party such as FinCEN Filer, LLC, to file the report?

20. How to file a do-it-yourself FinCEN BOI report?  This article gives you access to FinCEN’s 33-page FinCEN report FAQ book that do-it-yourselfers should read before filing.  Don’t file the report unless you understand the law.

Here are the facts company owners need to know.  Click on the green text to open up the box to read its contents.

FinCEN estimates that over 32,000,000 U.S. companies must file a FinCEN BOI report in 2024 and over 5,000,000 each year after 2024.

Probably.  The CTA contains 23 exemptions that allow exempt companies to avoid filing a FinCEN BOI report.  See the list of exempt companies to see if your company is exempt and not a reporting company.

  • Companies formed before 2024 must file their FinCEN BOI report on or before December 31, 2024.
  • Companies formed in 2024 must file their FinCEN BOI report within 90 days of the date the company was created.
  • Companies formed after 2024 must file their FinCEN BOI report within 30 days of the date the company was created.

The FinCEN BOI report must disclose information to FinCEN about the company (called the reporting company), each of its beneficial owners and its applicant(s) if the company was formed after 2023.  Only people can be a beneficial owner or applicant.

  1. legal name,
  2. any alternative names through which the company is engaging in business (trade names or “d/b/a names”),
  3. its business street address,
  4. its jurisdiction of formation or registration, and
  5. a unique identification number.  The reporting company must submit a Taxpayer Identification Number (TIN) issued by the IRS (including an Employer Identification Number (EIN)), but if the reporting company does not have a TIN or EIN then it must disclose a Dun & Bradstreet Data Universal Numbering System (DUNS) number or a Legal Entity Identifier (LEI).

A beneficial owner means, with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise exercises substantial control over the entity or owns or controls not less than 25 percent of the ownership interests of the entity.  There are three specific indicators of substantial control of a reporting company:

  1. Service as a senior officer of a reporting company;
  2. authority over the appointment or removal of any senior officer or dominant majority of the board of directors (or similar body) of a reporting company; and
  3. direction, determination, or decision of, or substantial influence over, important matters of a reporting company.
  • Reporting companies are required to identify all individuals who exercise substantial control over the company. There is no limit to the number of individuals who can be reported for exercising substantial control. An individual exercises substantial control over a reporting company if the individual meets any of four general criteria:
    1. the individual is a senior officer;
    2. the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
    3. the individual is an important decision-maker; or
    4. the individual has any other form of substantial control over the reporting company. See the chart below for details about these criteria.

If an individual falls into any of the categories below, the individual is exercising substantial control and is a beneficial owner:

    1. A married couple jointly owns 25% or more of a reporting company.  Each person is a beneficial owner of the reporting company.
    2. The individual is a manager of a limited liability company even if the individual is not a member of the LLC.
    3. The individual is the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function.
    4. The individual has the authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.

Yes.  An individual who is a trustee of a trust that owns 25% or more of a reporting company or who has control of the reporting company is a beneficial owner of that reporting company.  The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:

    1. A trustee or other individual with the authority to dispose of trust assets.
    2. A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
    3. A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.

1. Minor Child: An individual qualifies for this exception if the individual is a minor child, as defined under the law of the State or Indian tribe in which the domestic reporting company is created or the foreign reporting company is first registered.  The reporting company may instead report information about the parent or legal guardian of the minor child. Note: This exception only applies if a parent or legal guardian’s information is reported in lieu of the minor child’s information. Also, when the minor child reaches the age of majority, as defined by the law of the State or Indian tribe in which the reporting company was created or first registered, the exception no longer applies. At that time, if the individual is a beneficial owner, the reporting company must file an updated BOI report providing the individual’s own information.

2. Nominee, intermediary, custodian, or agent: An individual qualifies for this exception if the individual merely acts on behalf of an actual beneficial owner as the beneficial owner’s nominee, intermediary, custodian, OR agent. Note: Individuals who perform ordinary advisory or other contractual services (such as tax professionals) likely qualify for this exception. In scenarios where this exception applies, the actual beneficial owner must still be reported.

3. Employee: An individual qualifies for this exception if all three of the following criteria apply: (i) The individual is an employee of the reporting company when applying the meaning of “employee” provided in 26 CFR 54.4980H-1(a)(15). In general, the term employee means that an individual is subject to the will and control of the employer in what and how to do work, and that the employer may discharge the individual from work.  (ii) The individual’s substantial control over, or economic benefits from, the reporting company are derived solely from the employment status of the individual as an employee.  (iii) The individual is not a senior officer of the reporting company. The term “senior officer” means any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function.

4. Inheritor: The individual’s only interest in the reporting company is a future interest through a right of inheritance, such as through a will providing a future interest in a company.  Note: Once the individual inherits the interest, this exception no longer applies, and the individual may qualify as a beneficial owner.

5. Creditor: An individual qualifies for this exception if the individual is a creditor of the reporting company. The term “creditor” means an individual who would meet the definition of a beneficial owner of the reporting company solely through rights or interests for the payment of a predetermined sum of money, such as a debt incurred by the reporting company, or a loan covenant or other similar right associated with such right to receive payment that is intended to secure the right to receive payment or enhance the likelihood of repayment. For example, an individual qualifies for the creditor exception if the individual is entitled to payment from the reporting company to satisfy a loan or debt, so long as this entitlement is the only ownership interest the individual has in the reporting company.

1. The individual’s name;

2. date of birth;

3. residential address; and

4. an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document.  The reporting company will also have to include in the report an image of the identification document used to obtain the identifying number in item 4.

Every person who will file a FinCEN BOI report that has one or more beneficial owners other than the filer and the filer’s spouse should not file the report until every beneficial owner gives the report filer a signed affidavit that discloses the signer’s information and that causes the signer to represent and warrant that all the information given to the filer by the beneficial owner is true, correct, and complete.  FinCEN Filer, LLC sells an editable Word Beneficial Owner Information Report Affidavit that asks a beneficial owner to enter the beneficial owner’s FinCEN information into the Affidavit and represent and warrant by signing the Affidavit that all of the beneficial owner’s information in the Affidavit is true, correct, and complete.  The owner must sign the Affidavit and have his or her signature notarized.  You can buy this editable Word FinCEN BOI Report Affidavit for $97 and customize it for your company and beneficial owners.  Immediately upon paying for the form FinCEN Filer’s system will email a Word version of the form to the email address given in the order form.

An applicant is an individual who forms a reporting company by filing an application to form a corporation, limited liability company, or other similar entity under the laws of a State or Indian Tribe; or registers or files an application to register a corporation, limited liability company, or other similar entity formed under the laws of a foreign country to do business in the United States by filing a document with the secretary of state or similar office under the laws of a State or Indian Tribe.

A company applicant also includes any individual who directs or controls the filing of the formation document by another person. This ensures that the reporting company provides information on individuals who are responsible for the decision to form a reporting company given that, in many cases, the company applicant may be an employee of a business formation service or law firm, or an associate, agent, or family member who is filing the document on behalf of another individual. In such a case, the individual directing or controlling the formation of a legal entity should not be able to remain anonymous simply by directing another individual to file the requisite paperwork, and must therefore disclose his or her identity to FinCEN along with the individual that made the filing.

The FinCEN BOI report must disclose the following about each applicant:

1. The individual’s name;

2. date of birth;

3. residential address; and

4. an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document.  The reporting company will also have to include in the report an image of the identification document used to obtain the identifying number in item 4.

Yes.  The Corporate Transparency Act provides that a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

Both individuals and entities can be held liable for willful violations of the CTA. This can include not only an individual who actually files (or attempts to file) false information with FinCEN, but also anyone who willfully provides the filer with false information to report. Both individuals and entities may also be liable for willfully failing to report complete or updated beneficial ownership information. In such circumstances, individuals can be held liable if they either cause the failure or are a senior officer at the company at the time of the failure.

Yes. An individual who willfully files a false or fraudulent beneficial ownership information report on a company’s behalf may be subject to the same civil and criminal penalties as the reporting company and its senior officers.  See FinCEN Filer’s video called “Alert: Legal Consequences of Filing a False FinCEN Report” and my article called “Warning: Your LLC Must File a FinCEN BOI Report or Be Fined $500/Day” to learn about report filer’s potential liabilities.

Yes. As described above, an enforcement action can be brought against an individual who willfully causes a reporting company’s failure to submit complete or updated beneficial ownership information to FinCEN. This would include a beneficial owner or company applicant who willfully fails to provide required information to a reporting company.

If you have one or more reporting companies each company must file a FinCEN BOI report before the deadline to avoid the $500 a day late fine.  You have two choices:  (1) file the report yourself, or (2) hire an experienced FinCEN BOI report filing service such as us, FinCEN Filer, LLC, to file the report.

Warning: Legal Consequences of Filing a False FinCEN BOI Report

Our video called “Alert: Legal Consequences of Filing a False FinCEN Report” at https://youtu.be/iGTApl0tHDM should be watched by everybody who will file a FinCEN BOI Report.  Do not file a FinCEN BOI report unless you understand the legal consequences of filing a false report which is explained in the video.

If you intend to submit a FinCEN Beneficial Owner Information report you need to understand that you can be fined and/or imprisoned if you file a FinCEN BOI report that contains false or fraudulent information.  People who file FinCEN BOI reports for companies that have multiple beneficial owners are particularly at risk because they have to hope that all the beneficial owners give them correct and complete information about themselves.

The person who submits a FinCEN BOI report must check a box on the FinCEN BOI report that says

I certify that I am authorized to file this BOIR on behalf of the reporting company. I further certify, on behalf of the reporting company, that the information contained in this BOIR is true, correct, and complete.  The willful failure to report complete beneficial ownership information to FinCEN, the willful failure to update beneficial ownership information provided to FinCEN when previously reported information changes, or the willful provision of false or fraudulent beneficial ownership information to FinCEN, may result in civil or criminal penalties. A person may also be subject to civil or criminal penalties for willfully causing a reporting company to report incomplete or false beneficial ownership information to FinCEN.”

Every person who will file a FinCEN BOI report that has one or more beneficial owners other than the filer and the filer’s spouse should not file the report until every beneficial owner signs an affidavit that discloses the signer’s information and that causes the signer to represent and warrant that all the information given to the filer by the beneficial owner is true, correct, and complete.

Buy Our Editable Affidavit Form

Purchase an editable Word Beneficial Owner Information Report Affidavit that asks a beneficial owner to enter the beneficial owner’s FinCEN information into the Affidavit and represent and warrant by signing the Affidavit that all of the beneficial owner’s information in the Affidavit is true, correct, and complete.  The owner must sign the Affidavit and have his or her signature notarized.  You can buy our editable Word Affidavit and customize it for your company and beneficial owners.  Don’t file a FinCEN BOI Report without confirming that all beneficial owner information is true, correct, and complete.

Click here to buy FinCEN Filer, LLC’s, editable Word Beneficial Owner Affidavit for $97.  Immediately upon paying for the form FinCEN Filer’s system will email a Word version of the form to the email address given in the order form.

Before anybody files a FinCEN BOI report he or she needs to read FinCEN’s 33 page “Beneficial Ownership Information Reporting Frequently Asked Questions” book.  FinCEN BOI report filers run the risk of being fined $500 a day for a late report and up to two years in prison for willfully filing a false report.  DO NOT TAKE ON THIS POTENTIAL FILING LIABILITY WITHOUT LEARNING ABOUT FINCEN BOI REPORTS.  Learn about filer liability by watching the video on our YouTube channel called Alert: Legal Consequences of Filing a False FinCEN BOI Report.”

This explanation book contains a lot of good information report filers should know before filing such as (1) can a reporting company have a P.O box address, (2) what happens if a beneficial owner does not have their picture on their ID document, (3) what if a beneficial owner refuses to give all of his or her information, and (4) what if a beneficial owner does not have a residential address?  Make sure you understand everything before you incur the liability of filing the report.

How to File a FinCEN BOI Report Online

After reading the book go to FinCEN’s website at https://boiefiling.fincen.gov/boir/html to submit and file the online report.

FAQ Table of Contents

Here’s the table of contents on FinCEN’s book that tells FinCEN BOI report filers everything they need to know about filing a do-it-yourself FinCEN BOI report:

A. General Questions

A. 1. What is beneficial ownership information?

A. 2. Why do companies have to report beneficial ownership information to the U.S. Department of the Treasury?

A. 3. Under the Corporate Transparency Act, who can access beneficial ownership information?

A. 4. How will companies become aware of the BOI reporting requirements?

B. Reporting Process

B. 1. Should my company report beneficial ownership information now?

B. 2. When do I need to report my company’s beneficial ownership information to FinCEN?

B. 3. When will FinCEN accept beneficial ownership information reports?

B. 4. Will there be a fee for submitting a beneficial ownership information report to FinCEN?

B. 5. How will I report my company’s beneficial ownership information?

B. 6. Where can I find the form to report?

B. 7. Is a reporting company required to use an attorney or a certified public accountant (CPA) to submit beneficial ownership information to FinCEN?

B. 8. Who can file a BOI report on behalf of a reporting company, and what information will be collected on filers?

 

C. Reporting Company

C. 1. What companies will be required to report beneficial ownership information to FinCEN?

C. 2. Are some companies exempt from the reporting requirement?

C. 3. Are certain corporate entities, such as statutory trusts, business trusts, or foundations, reporting companies?

C. 4. Is a trust considered a reporting company if it registers with a court of law for the purpose of establishing the court’s jurisdiction over any disputes involving the trust?

C. 5. Does the activity or revenue of a company determine whether it is a reporting company?

C. 6. Is a sole proprietorship a reporting company?

C. 7. Can a company created or registered in a U.S. territory be considered a reporting company?

 

D. Beneficial Owner

D. 1. Who is a beneficial owner of a reporting company?

D. 2. What is substantial control?

D. 3. One of the indicators of substantial control is that the individual is an important decision-maker. What are important decisions?

D. 4. What is an ownership interest?

D. 5. Who qualifies for an exception from the beneficial owner definition?

D. 6. Is my accountant or lawyer considered a beneficial owner?

D. 7. What information should a reporting company report about a beneficial owner who holds their ownership interests in the reporting company through multiple exempt entities?

D. 8. Is an unaffiliated company that provides a service to the reporting company by managing its day-to-day operations, but does not make decisions on important matters, a beneficial owner of the reporting company?

D. 9. Is a member of a reporting company’s board of directors always a beneficial owner of the reporting company?

D. 10. Is a reporting company’s designated “partnership representative” or “tax matters partner” a beneficial owner?

D. 11. What should a reporting company report if its ownership is in dispute?

D. 12. Who does a reporting company report as a beneficial owner if a corporate entity owns or controls 25 percent or more of the ownership interests of the reporting company?

 

E. Company Applicant

E. 1. Who is a company applicant of a reporting company?

E. 2. Which reporting companies are required to report company applicants?

E. 3. Is my accountant or lawyer considered a company applicant?

E. 4. Can a company applicant be removed from a BOI report if the company applicant no longer has a relationship with the reporting company?

E. 5. The company applicants of a reporting company include the individual “primarily responsible for directing the filing of the creation or registration document.” What makes an individual “primarily responsible” for directing such a filing?

E. 6. Is a third-party courier or delivery service employee who only delivers documents that create or register a reporting company a company applicant?

E. 7. If an individual used an automated incorporation service, such as through a website or online platform, to file the creation or registration document for a reporting company, who is the company applicant?

 

F. Reporting Requirements

F. 1. Will a reporting company need to report any other information in addition to information about its beneficial owners?

F. 2. What information will a reporting company have to report about itself?

F. 3. What information will a reporting company have to report about its beneficial owners?

F. 4. What information will a reporting company have to report about its company applicants?

F. 5. What are some acceptable forms of identification that will meet the reporting requirement?

F. 6. Is there a requirement to annually report beneficial ownership information?

F. 7. Does a reporting company have to report information about its parent or subsidiary companies?

F. 8. Can a reporting company report a P.O. box as its current address?

F. 9. Have I met FinCEN’s BOI reporting obligation if I filed a form or report that provides beneficial ownership information to a state office, a financial institution, or the IRS?

F. 10. If a beneficial owner or company applicant’s acceptable identification document does not include a photograph for religious reasons, will FinCEN accept the identification document without the photograph?

F. 11. What residential address should be reported if a reporting company is required to a report individual’s residential address, but that an individual does not have a permanent residential residence?

 

G. Initial Report

G. 1. When do I have to file an initial beneficial ownership information report with FinCEN?

G. 2. Can a parent company file a single BOI report on behalf of its group of companies?

G. 3. How can I obtain a Taxpayer Identification Number (TIN) for a new company quickly so that I can file an initial beneficial ownership information report on time?

G. 4. Should an initial BOI report include historical beneficial owners of a reporting company, or only beneficial owners as of the time of filing?

G. 5. How does a company created or registered after January 1, 2024, determine its date of creation or registration?

 

H. Updated Report

H. 1. What should I do if previously reported information changes?

H. 2. What are some likely triggers for needing to update a beneficial ownership information report?

H. 3. Is an updated BOI report required when the type of ownership interest a beneficial owner has in a reporting company changes?

H. 4. If a reporting company needs to update one piece of information on a BOI report, such as its legal name, does the reporting company have to fill out an entire new BOI report?

H. 5. Can a filer submit a late updated BOI report?

H. 6. If a reporting company last filed a “newly exempt entity” BOI report but subsequently loses its exempt status, what should it do?

 

I. Corrected Report

I. 1. What should I do if I learn of an inaccuracy in a report?

 

J. Newly Exempt Entity Report

J. 1. What should a reporting company do if it becomes exempt after already filing a report?

 

K. Compliance/Enforcement

K. 1. What happens if a reporting company does not report beneficial ownership information to FinCEN or fails to update or correct the information within the required timeframe?

K. 2. What penalties do individuals face for violating BOI reporting requirements?

K. 3. Who can be held liable for violating BOI reporting requirements?

K. 4. Is a reporting company responsible for ensuring the accuracy of the information that it reports to FinCEN, even if the reporting company obtains that information from another party?

K. 5. What should a reporting company do if a beneficial owner or company applicant withholds information?

 

L. Reporting Company Exemptions

L. 1. What are the criteria for the tax-exempt entity exemption from the beneficial ownership information reporting requirement?

L. 2. What are the criteria for the inactive entity exemption from the beneficial ownership information reporting requirement?

L. 3. What are the criteria for the subsidiary exemption from the beneficial ownership information reporting requirement?

L. 4. If I own a group of related companies, can I consolidate employees across those companies to meet the criteria of a large operating company exemption from the reporting company definition?

L. 5. How does a company report to FinCEN that the company is exempt?

L. 6. Does a subsidiary whose ownership interests are partially controlled by an exempt entity qualify for the subsidiary exemption?

 

M. FinCEN Identifier

M. 1. What is a FinCEN identifier?

M. 2. How can I use a FinCEN identifier?

M. 3. How do I request a FinCEN identifier?

M. 4. Are FinCEN identifiers required?

M. 5. Do I need to update or correct the information I submitted to obtain a FinCEN identifier?

M. 6. Is there any way to deactivate an individual’s FinCEN identifier that is no longer in use so that the individual no longer has to update the information associated with it?

M. 7. Who can request a FinCEN identifier on behalf of an individual?

 

N. Third-Party Service Providers

N. 1. Can a third-party service provider assist reporting companies by submitting required information to FinCEN on their behalf?

N. 2. What type of evidence will a reporting company receive as confirmation that its BOI report has been successfully filed by a third-party service provider?

N. 3. Will a third-party service provider be able to submit multiple BOI reports to FinCEN at the same time?

 

FinCEN Filer makes report filing very easy.  Hire us to file your FinCEN BOI report and take 5 – 10 minutes to enter your data in our ISO/IEC 27001 secure online filing system.  Our online system asks the reporting company’s contact person questions to collect all the required information for the report.  All info is saved securely online and viewable at any time by the reporting company’s contact person.  When all information has been entered, reviewed, and approved by the reporting company’s contact person FinCEN Filer, LLC, will file the report digitally by uploading the data from its database directly into FinCEN’s database.  No emails to FinCEN and no data entered manually into FinCEN’s online filing service.  Immediately after filing the report, we send a copy of the filed report to the reporting company’s contact person.

FinCEN Filer, LLC, gives a discount on additional filings when it files more than one report for the same beneficial owner(s).

Hire Us to File a FinCEN Report

Get peace of mind your company won’t be fined $500/day by hiring us to file your reporting company’s FinCEN BOI report.  After you pay you will be able to enter your company, beneficial owner, and applicant info in our ISO/IEC 27001 secure online system in 5 – 10 minutes and your company’s report will be filed electronically with FinCEN.  After filing we will email the filed report to the company’s contact person.