Beneficial Ownership Information: A Guide for Small Business Owners

If you own or run a small business, you may have to report beneficial owner information to the government. This is a new rule that aims to prevent criminals from using companies to hide their identity and activities. In this blog post, we will explain what beneficial ownership reporting is, who has to do it and how to do it.  

Disclaimer: Please note that this blog post is for informational purposes only and does not constitute legal advice. You should consult a lawyer or a professional advisor if you have specific questions about your situation.

What is beneficial ownership reporting?

Beneficial ownership reporting is a new requirement that was introduced by the Corporate Transparency Act (CTA), opens a new window, a law that was passed by Congress in 2020. The CTA requires certain companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), opens a new window, a part of the U.S. Department of Treasury. FinCEN is the agency that collects and analyzes financial data to combat financial crimes.

A beneficial owner, opens a new window is an individual who directly or indirectly owns or controls a company. A beneficial owner may have a stake in the company through other entities, such as trusts, partnerships, or shell companies. A beneficial owner may also have the power to make decisions for the company, such as hiring or firing managers, approving contracts, or changing the company's structure. FinCEN requires companies to report two types of beneficial owners: those who own 25% or more of the company, and those who have substantial control over the company.

Who has to file beneficial ownership information?

Not all companies have to file beneficial ownership information. The CTA only applies to certain types of companies that are created or registered in the U.S. or that are registered to do business in the U.S. However, there are some exemptions for companies that meet certain criteria; you can find the full list of exemptions, opens a new window on the FinCEN website and checklists to help you determine if any exemptions apply to your business.

When and how do businesses need to file?

Companies that are required to file beneficial ownership information have to do so electronically through a secure filing system on the FinCEN website, opens a new window. The information that they have to provide includes the names, dates of birth, addresses, and identification numbers of their beneficial owners. The report can be filed by anyone who has authority from the company, such as an owner, an employee, or a third-party service provider. Per the Northwest Colorado Small Business Development Center, opens a new window, the filing deadlines depend on when the company was created or registered.

Here are the main deadlines to remember:

• Companies that were created or registered before January 1, 2024, have until December 31, 2024, to file their initial report.
• Companies that were created or registered in 2024 have 90 days to file their initial report after receiving notice that their filing was accepted.
• Companies that were created or registered on or after January 1, 2025, have 30 days to file their initial report after receiving notice that their filing was accepted.
• Companies that have any changes to their beneficial ownership information have to file an updated report within 30 days of becoming aware of the change.

What are the consequences of not filing or mis-filing?

The penalties for not filing or mis-filing beneficial ownership information can be severe. Anyone who willfully violates the reporting requirements can face civil penalties and criminal penalties. It is very important to file your report on time and to make sure that the information is accurate and complete. If you make a mistake or an omission, you can correct it within 90 days of the deadline for the original report. 

Where can you find more information and assistance?

Here’s a list of resources to help you learn more about these requirements and if they apply to your business:

• Beneficial Ownership Information (BOI), opens a new window on the Financial Crimes Enforcement Network website
• Federal Reporting of Beneficial Ownership Information, opens a new window on the Colorado Secretary of State website
• BOI Quick Overview webinar, opens a new window from the Northwest Colorado Small Business Development Center
• Beneficial Owner Information Reporting video, opens a new window created by CEDS Finance