Understanding Beneficial Ownership Information Reporting Under the Corporate Transparency Act

Introduction to Beneficial Ownership Information Reporting

With the introduction of the Corporate Transparency Act (CTA), which officially took effect on January 1, 2024, businesses in the United States are now required to disclose their beneficial ownership details to the Financial Crimes Enforcement Network (FinCEN). This federal mandate is part of a broader national strategy to combat financial crimes such as money laundering, tax evasion, and the use of anonymous shell companies to conceal illicit activities. The law firm California Business Lawyer & Corporate Lawyer can help businesses navigate the evolving requirements of BOI reporting and ensure full compliance with the Corporate Transparency Act.

Beneficial ownership information refers to the personal and identifying details of individuals who ultimately own or control a company, and collecting it is essential for regulatory compliance because it helps uncover hidden ownership structures used for financial crimes. Despite temporary pauses and enforcement deferrals—such as the U.S. Department of the Treasury’s notice on March 2, 2025, which waived penalties for U.S.-based entities failing to file on time—compliance is still essential. Foreign entities, however, remain subject to enforcement actions. Updated guidance is anticipated in April 2025, but companies must prepare now to meet the law’s expectations.

What Is Beneficial Ownership and Why It Matters

A beneficial owner is any natural person who either directly or indirectly owns at least 25% of a reporting company’s ownership interest or has significant control over its operations. This definition includes individuals who exercise “substantial control,” such as senior officers (e.g., CEOs, CFOs), those who can appoint or remove executives, or those who influence major decisions about business operations, financial expenditures, or contracts.

The primary purpose of identifying beneficial owners is to enhance transparency. Without it, individuals could conceal ownership through layers of intermediaries, thus bypassing legal scrutiny. This lack of visibility enables illegal activities, such as hiding assets, financing terrorism, or laundering money through seemingly legitimate enterprises.

By collecting and storing beneficial ownership data, FinCEN supports law enforcement agencies in tracing illicit financial activities, enhancing national security, and improving the overall integrity of the financial system.

Who Must File a Beneficial Ownership Information Report (BOIR)?

The BOI reporting requirement applies to most U.S.-based corporations, limited liability companies (LLCs), and similar legal entities created by filing documents with a secretary of state or equivalent office. Foreign companies registered to do business in the U.S. must also comply.

These entities are referred to as “reporting companies.” Each must submit its beneficial ownership information electronically through FinCEN’s secure online portal. However, the CTA also lists 23 categories of organizations that are exempt from filing. These include publicly traded companies, large operating entities with 20+ full-time employees and significant gross receipts, certain nonprofits, and government-regulated entities such as banks or insurance companies.

Sole proprietorships are not required to report because they do not register with state governments and are not considered legal entities under the CTA.

Understanding the Role of Company Applicants

For businesses formed after January 1, 2024, the BOIR must also include details about the “company applicants.” These are individuals who either directly submitted the formation documents or were primarily responsible for directing or managing the filing process. This can include a lawyer, a business partner, or anyone else who had a role in the formal creation of the company.

If only one person was involved in the formation, then only that person’s information needs to be reported. If two or more individuals contributed, both must be listed. Like beneficial owners, company applicants must submit their full legal names, addresses, dates of birth, and identifying information from acceptable documents such as driver’s licenses or passports.

Information Required in the Beneficial Ownership Information Report

When completing the BOIR, companies must gather and submit several categories of information, both about the business itself and its beneficial owners.

For the reporting company:

• Legal name of the company
• Any trade or “doing business as” (DBA) names
• The physical U.S. address of the company (not a P.O. box or registered agent address)
• The jurisdiction in which the company was created or registered
• The company’s Employer Identification Number (EIN)

For each beneficial owner and company applicant:

• Full legal name
• Date of birth
• Residential street address (no P.O. boxes)
• Unique identifying number and issuing jurisdiction from an acceptable ID (e.g., passport or driver’s license)
• A digital copy of the identification document in .jpg, .jpeg, .png, or .pdf format (under 4MB in size)

Exceptions From Being Classified as Beneficial Owners

Although the CTA provides a broad definition of beneficial ownership, it carves out several exceptions. These exceptions ensure that individuals who may have a limited or passive role in a company are not unnecessarily burdened by the reporting requirement.

The five key exceptions include:

1. Minors – Instead of including the child’s personal information, the report must include the parent or legal guardian’s details. Once the minor turns 18, the company must update the BOIR to include the new adult.
2. Nominees, Intermediaries, Custodians, or Agents – These individuals acting on behalf of another person are not considered beneficial owners.
3. Employees – Individuals whose only influence or economic benefit is derived from their employment (not ownership or executive roles) are exempt.
4. Inheritors – Individuals who have inherited interest but do not yet control it are exempt.
5. Creditors – Simply being owed money by the company does not make someone a beneficial owner.

These exemptions require specific conditions to be met. For example, to qualify as an exempt employee, the person must not serve in a senior officer role and must be fully under the direction and control of the employer.

How and When to File the BOIR

Businesses can file their BOI report directly through FinCEN’s secure BOI e-filing system. The online submission process is divided into four sections:

1. Filing – General submission information.
2. Reporting Company – Basic company details.
3. Company Applicant – Required if the company was formed on or after January 1, 2024.
4. Beneficial Owners – Full details of each individual who qualifies under the CTA.

Once all information is entered, the system allows you to verify and review your entries. Any errors or omissions will be flagged for correction before final submission. Upon submission, a transcript (PDF) of the report is generated. It’s important to save this confirmation alongside essential documents like your articles of organization.

If you’re handling the process yourself, you should allocate at least one to two hours for filing. However, due to the complexity and risk of errors, many organizations opt for third-party services to manage the process.

The Timing and Deadlines for BOI Reporting

For companies formed before January 1, 2024, the deadline to file the initial BOI report is January 1, 2025. New companies formed during 2024 have 90 days from their registration date to file, while those formed in 2025 and beyond have 30 days.

Although the Department of the Treasury temporarily waived penalties for late U.S. filers as of March 2025, this may change, and foreign entities are still subject to enforcement. FinCEN has made it clear that the deadlines will not be extended under normal circumstances.

Failure to file on time or provide accurate information may result in civil penalties starting at $591 per day, adjusted annually for inflation. These can escalate quickly, especially for companies that knowingly submit false or incomplete data.

Updating the Report: Ongoing Responsibilities

BOI reporting isn’t a one-time requirement. Companies must update FinCEN within 30 days of any change to the information provided in their original filing. This includes:

• A beneficial owner’s legal name, address, or ID document changes
• The addition or removal of a beneficial owner
• A minor beneficial owner reaching adulthood
• The death of a beneficial owner
• Corrections to prior inaccuracies (e.g., misspellings or wrong information)

Failure to provide timely updates can trigger the same penalties as failing to file in the first place.

FinCEN’s Database and Who Can Access It

FinCEN maintains all reported beneficial ownership data in its Beneficial Ownership Secure System (BOSS). This information is not made public. Access is highly restricted and granted only to:

• Federal, state, local, and tribal law enforcement agencies
• Government regulators involved in national security, intelligence, or criminal investigations
• Financial institutions (by spring 2025) and certain foreign agencies under strict guidelines

Each agency or organization must enter into a memorandum of understanding (MOU) with FinCEN, outlining how they will protect the data’s confidentiality and integrity. This ensures that the information remains secure and is only used for its intended purpose: preventing and prosecuting financial crimes.

How Harbor Compliance and LegalZoom Help Companies File BOIR

Businesses struggling to meet BOIR deadlines or seeking professional assistance can turn to services like Harbor Compliance or LegalZoom. These firms offer streamlined filing services that collect the necessary documentation, prepare the report, and file it on your behalf—often within 48 hours.

Harbor Compliance provides full-service BOI reporting with additional features like:

• Reminders for when updates are required
• Four filings per year if needed
• A centralized dashboard (Records Manager add-on) to view and track leadership and ownership information
• Dedicated support for nonprofits and multi-entity organizations

LegalZoom also assists with compliance filings, including BOIR and annual reports, and provides access to attorneys and compliance experts who monitor the latest federal and state regulatory updates.

These services help eliminate the risk of late filings, missed updates, or incomplete documentation—issues that can lead to penalties and enforcement actions.

Other Compliance and Regulatory Support Services

Beyond BOIR, companies often need help navigating broader compliance requirements. Firms like Harbor Compliance offer a suite of additional services:

• Entity lifecycle management (name reservations, amendments, dissolutions)
• Registered agent services
• Business license applications and renewals
• Tax registration (EINs, payroll taxes, sales taxes)
• Nonprofit incorporation and 501(c) tax exemption support
• Document drop-off and retrieval services (e.g., certificates of good standing)

Using an integrated compliance platform helps small and midsize companies manage regulatory tasks efficiently and avoid administrative pitfalls that could result in delays or penalties.

Conclusion: Staying Ahead of BOIR Compliance

Beneficial ownership reporting under the Corporate Transparency Act represents a major shift in business transparency laws. It imposes new responsibilities on millions of businesses operating in or entering the U.S. market. Understanding who qualifies as a beneficial owner, what information must be reported, and how to file is crucial for compliance.

Whether you choose to file on your own or partner with a service provider, being proactive is essential. The deadlines are strict, and the penalties for non-compliance are steep. However, with the right knowledge and tools, your business can meet its obligations with confidence—and help contribute to a more transparent, accountable corporate environment.