Many U.S. small business owners must report beneficial ownership information (BOI) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. With this deadline fast approaching, here’s a brief reminder of who must report and how to do so.

What is BOI reporting?

Instituted by the Corporate Transparency Act (CTA), the BOI reporting requirements are intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud. They mandate that many small businesses provide information about their “beneficial owners” (the individuals who ultimately own or control the business) to FinCEN.

As of this writing, there’s pending litigation about the CTA’s constitutionality. In addition, some members of Congress have requested that FinCEN delay the compliance deadline. But because the penalties for noncompliance are significant, don’t wait to see what happens. If you haven’t already done so, determine now whether your business is subject to BOI reporting and, if it is, complete the required reporting by the applicable deadline.

Which businesses are affected?

The CTA is intended to curb illicit financing, including terrorist financing, money laundering and other illegal activities. But it could also open the door to the inspection of family offices, investment angels and other private individuals who may have been shielded from scrutiny in the past.

The CTA’s rules generally apply to corporations, limited liability companies, partnerships and other legal entities created through documents filed with the appropriate state authorities. But certain types of entities are exempt from the reporting rules.

Notably, “large operating companies” are exempt. These are companies that employ more than 20 people on a full-time basis, have more than $5 million in gross receipts or sales (not including receipts and sales from foreign sources), and physically operate in the United States. (Many of these companies already must meet other reporting requirements that involve providing comparable information.)

What happens if you don’t comply?

Failure to submit a BOI report by the applicable deadline may result in civil or criminal penalties, or both. According to FinCEN, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day the violation continues. However, this civil penalty amount is adjusted annually for inflation and currently is $591 per day.

A person who willfully violates the BOI reporting requirements 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 BOI report, willfully filing false BOI, or willfully failing to correct or update previously reported BOI.

What are the compliance deadlines?

The deadline to comply depends on the entity’s date of formation. Reporting companies created or registered before January 1, 2024, have one year to comply by filing initial reports, which means their deadline is January 1, 2025. Those created or registered on or after January 1, 2024, but before January 1, 2025, have 90 days upon receipt of their creation or registration documents to file their initial reports. Entities created or registered on or after January 1, 2025, will have 30 days upon receipt of their creation or registration documents to file their initial reports.

FinCEN has announced deadline extensions for certain businesses affected by recent hurricanes.

Why is FinCEN warning about scams?

Business owners who are preparing to file BOI reports should be alert. FinCEN is warning of scams designed to steal sensitive information by targeting BOI filers.

Scammers may reference fake forms, such as “Form 4022” or “Form 5102,” or they might refer to a non-existent agency, the “U.S. Business Regulations Dept.” Other red flags include requests for fee payment, threats of penalties, and suspicious URLs or QR codes. FinCEN advises businesses to verify senders before answering correspondence.

Where can I learn more?

Contact us with questions or for assistance. Visit Beneficial Ownership Information Reporting | FinCEN.gov for more information about the BOI requirements, how to file a report and which locations have extended deadlines due to hurricanes.