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Startup Central

BOI Reporting Requirements Under the Corporate Transparency Act

Promise Legal Staff

• 3 min read
BOI Reporting Requirements Under the Corporate Transparency Act

The Corporate Transparency Act (CTA), effective January 1, 2024, requires certain US and foreign-registered entities to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This measure combats shell companies, money laundering, tax evasion, and terrorism financing by identifying individuals who truly own or control entities doing business in the United States. Startups must understand their reporting obligations, deadlines, exemptions, and penalties to ensure compliance.

1. Definitions

Reporting Company

An entity formed in the US (corporation, LLC, or similar) by filing with a state or tribal authority, or a foreign entity registered to do business in the US. Exemptions apply to large operating companies, regulated entities, and certain inactive entities.

Beneficial Owner

An individual who, directly or indirectly, either:

  • Owns or controls ≥25% of ownership interests, or
  • Exercises substantial control (senior officer, board authority, or other significant influence).

Company Applicant

The individual who files the formation or registration documents or directs that filing. Multiple filers designate the person with primary responsibility.

2. Reporting Companies

Startups incorporated in the US typically qualify as reporting companies. Exemptions include:

  • Publicly traded companies
  • Large operating companies (>20 US employees, physical office, >$5 million annual sales)
  • Certain regulated entities (banks, insurance, etc.)
  • Inactive companies formed before 2020 with no activity and no foreign owners

3. Beneficial Owners

Identify all individuals meeting either control or ownership criteria. Document review (shareholder agreements, board minutes) and legal counsel help determine substantial control. FinCEN guidance offers clarity: FinCEN BOI Fact Sheet.

4. Reportable Information

  • Reporting Company: Legal name, trade names, address, jurisdiction, and IRS Taxpayer ID.
  • Beneficial Owners & Applicants: Full legal name, date of birth, residential or business address, and a unique ID number from an acceptable document (driver’s license, passport) plus issuing jurisdiction.

5. Filing Process with FinCEN

  1. Determine if the entity is a reporting company or qualifies for an exemption.
  2. Gather required company and individual information.
  3. Use FinCEN’s secure BOI portal to file:
    • Entities existing before Jan 1, 2024: initial report due Jan 1, 2025.
    • Entities existing in 2024: 90 days after registration.
    • Entities registered Jan 1, 2025, or later: 30 days after effective registration.
  4. Update BOI within 30 days of any change in reported information.
  5. Correct errors within 90 days of discovery, with self-certification of correction.

FinCEN reports: FinCEN BOI Resources.

6. Exemptions

23 entity types exempt from BOI reporting. Notably, US‐formed domestic entities are exempt (interim final rule March 2025). Foreign entities registered in the US remain subject. Exemptions include:

  • Public companies
  • Large operating companies
  • Certain regulated financial institutions
  • Inactive, pre-2020 entities with no foreign owners

7. Penalties

Non-compliance risks civil and criminal penalties:

  • Civil: Up to $500/day for late or inaccurate reporting.
  • Criminal: Up to $10,000 fine and two years imprisonment for willful violations or unauthorized disclosure.

8. State vs. Federal Interaction

Federal BOI reporting complements state formation filings:

  • State filings establish entity existence; BOI reports establish ownership transparency.
  • State laws (e.g., NY LLC Transparency Act) may require public BOI filings; CTA filings are non-public.
  • Startups must maintain dual compliance: state registration plus federal BOI reporting.

9. Best Practices

  • Early assessment of reporting obligations during entity formation.
  • Maintain centralized ownership records and governance documents.
  • Use compliance software and automation for data collection and updates.
  • Appoint a dedicated compliance officer for BOI responsibilities.
  • Train key personnel on CTA requirements and BOI procedures.

10. Next Steps & Checklist

  1. Determine entity status and exemptions.
  2. Identify all beneficial owners and company applicants.
  3. Collect required information and documentation.
  4. File initial BOI report by deadline.
  5. Implement update and correction protocols.
  6. Review and refine compliance policies annually.

11. FAQ

Q1: Who must report?
Most US-formed corporations and LLCs unless exempt. Foreign entities registered in the US must also report.

Q2: What is a BOI report?
A submission to FinCEN listing the company’s owners and controllers, with identifying details.

Q3: How often to update?
Within 30 days of any change in beneficial ownership or applicant information.

Q4: Is BOI public?
No. BOI resides in a secure FinCEN database with restricted access.

By following this guide, startups can navigate CTA BOI reporting requirements effectively, ensuring compliance and contributing to a more transparent corporate ecosystem.