Own or operate a small corporation or LLC in the United States? Sometime before the year ends, you need to file a BOIR, also known as beneficial ownership information report, with FinCEN, also known as the Financial Crimes Enforcement Network.
Bad News and Good News
So the bad news first. The penalties for not filing a BOIR? Pretty ugly. FinCEN can hit you with a $500 per day penalty up to $10,000. Theoretically, you can also go to prison.
The good news though? The BOIR filing is straightforward. When you file your BOIR, you name the reporting company. That’s what FinCEN calls your corporation or LLC. And you identify the beneficial owners who own 25 percent or more of the corporation or LLC.
And some more good news. Though the filing definitely counts as a headache, you can ease the burden by using a handful of BOIR filing tips.
BOIR Filing Tip #1: Use the FinCEN’s Free File BOIR Online Tool
A first tip? At the very least—even if you don’t want to file the BOI report yourself? Experiment with the free, mostly easy-to-use online tool that the FinCEN provides: File Online BOIR.
In a nutshell, the online BOIR filing collects the name and address of a small corporation or LLC and then as expected information about people who own 25 percent or more of the entity.
The only tricky part of simple filings? You need a image of a current government issued ID. Like a driver’s license. Or passport.
This obvious related tip: You should not need to pay someone to use their tool to file. Just use the free tool from FinCEN.
BOIR Filing Tip #2: Treat People with Substantial Control as Beneficial Owners
A next tip? The FinCEN doesn’t just want the names and addresses of people who own 25 percent or more of a corporation or LLC. They also want the names of people who potentially control the corporation or LLC.
Accordingly, you need to identify these people. Fortunately, that identification? Pretty easy in most cases. Include members in member-managed limited liability companies. Include managers in manager-managed limited liability companies. Include directors and corporate officers in corporations.
A good rule of thumb to avoid the horrific penalties that FinCEN can levy? Over-disclose.
BOIR Filing Tip #3: Treat Spouses in Community Property States as Beneficial Owners
If a married beneficial owner resides in a community property state and her or his interest in the reporting entity counts as community property? We think you include the spouse as a beneficial owner too.
Now quite honestly? The guidance from FinCEN on this? Patchy. But the safe bet is to over-disclose.
BOIR Filing Tip #4: Calculate Indirect Ownership Percentages if Tiered Ownership
Ignore this tip if the reporting company you’re dealing with is owned only by individuals.
But if the reporting company is owned by other reporting companies? Calculate the effective ownership percentage to determine whether a beneficial owner needs to be disclosed as part of the BOIR.
As noted earlier, the ownership percentage that triggers disclosure equals 25 percent.
So, if someone (an individual) owns 50 percent of a corporation or LLC that owns 50 percent of the reporting company you’re filing a BOIR for? That equates to 25 percent. Because 50 percent of 50 percent equals 25 percent. And that means you should include that individual as a beneficial owner.
BOIR Filing Tip #5: Select the Right Government Identification
As mentioned, you provide government issued identification for your BOIR filing. And here’s a rub: When your government identification changes? Like it expires and gets renewed? You need to supply an updated image of the new identification.
For this reason? If you have a choice, pick a government ID that expires as late as possible. Don’t use your drivers license that expires in two years, for example, if your passport expires in eight years. In that situation, use your passport.
BOIR Filing Tip #6: Use FinCEN IDs for Beneficial Owners
You can supply the name, address and government identification document for each beneficial owner a reporting company discloses. For example, if three brothers, Tom, Dick and Harry, together own an LLC, you can just name and identify each of the three brothers when you file the BOIR for that LLC.
But what if the three brothers own a bunch of LLCs. For example, what if they collectively invest in ten different real estate properties? And what if they use a separate LLC for each property? Do you have to enter the same information over and over again?
No, you don’t. Individuals can instead create a FinCEN ID for themselves (here’s the FinCEN page you use: FinCEN ID application). For example, Tom can create a FinCEN ID for Tom. Dick can do this for Dick. Harry can, well, you get the idea. Once the guys do this, you can supply the FinCEN ID for Tom, Dick and Harry rather than all their name and address details when you file the BOIR for an LLC.
This approach obviously saves time if you’ve got multiple reporting companies to file a BOIR for. But you have another reason to take this approach, too.
The FinCEN identifier approach makes it easier to update the BOIR for changes in beneficial owner information. For example, if Tom, Dick and Harry own ten LLCs? And Tom moves so his address changes? If Tom created a FinCEN ID, all he needs to do is update his FinCEN ID. That change to Tom’s address information then ripples through the ten LLCs he’s a beneficial owner in.
If people don’t use a FinCEN ID, however? You then do need to update each of the ten LLC’s BOIRs.
BOIR Filing Tip #7: Download the Transcript
So you’re going to step through half a dozen input worksheets, entering information about the reporting company and its beneficial owners. At the end, you’ll provide your name and contact information if you’re the one filing the BOIR. And then you’ll click Submit.
After the BOIR system accepts your submission, you will get a chance to download a transcript of the information. Download and save this transcript as a record of your filing. You may want to supply it to the individual beneficial owners you named. You will also want to keep it handy so you know what you told FinCEN. (If any of the information changes, as noted, you need to file an updated BOIR using the same tool you earlier used to file the initial report.)
BOIR Filing Tip #8: Don’t Worry About Making a Mistake
You want to be careful as you enter the data for your BOIR. But don’t worry about making a mistake.
Instead, check the transcript you get for filing. Make sure it’s correct. And then if it isn’t? Fix your error by filing a corrected BOIR.
BOIR Filing Tip #9: Outsource BOIR to Your Accountant If You Get into Trouble
Do-it-yourself works for your BOIR filing in most situations. Especially if you do a little bit of research upfront. Like you’re doing by reading this blog post. (Reading our earlier Evergreen Small Business blog post, BOI Reports and Your Small Business, about the BOIR filing also makes sense.)
But if you get into this and find, oh my gosh, the process makes zero sense? No problem. Outsource the work to your accountant. He or she should do this for you. (We’re offering to do this for all of our clients.) Your accountants should already have most of the information they need. They will be much better positioned to work with situations where there are multiple reporting companies. And situations where reporting companies own reporting companies. They can also check in with you about changes when they do your annual tax returns.
Note: For brand new reporting companies formed in 2024, the law firm or document preparation firm should prepare the BOIR as part of the incorporation process. Note that this filing should occur for all practical purposes immediately but technically within 90 days of filing. In future years, by the way, the 90 day timeclock shortens to 30 days.
BOIR Filing Tip #10: Remember to Update BOIR
A final tip: You will need to update the information in your BOIR report for changes. If an address or name changes for example? You need to update the affected BOIR report within 30 days. Remember to do this.
By the way and just so you know? This requirement to “immediately update” is probably the big reason why as many people as possible should DIY the BOIR filing. Folks want to know how to do this themselves so they can quickly cross it off their lists.