BOI compliance updates for ownership dilution

A. Major scope change: FinCEN announced and published an interim final rule in March 2025 that removed the BOI reporting requirement for U.S. domestic companies and U.S. persons. The interim final rule (effective March 26, 2025) revises the definition of “reporting company” so that only entities formed under the law of a foreign country and registered to do business in a U.S. State or Tribal jurisdiction (i.e., foreign reporting companies) remain subject to BOI reporting. FinCEN’s BOI page and the Federal Register notice provide this official change and the effective date. B. Who still must report and deadlines: The interim final rule retains reporting requirements for foreign reporting companies (with some modifications and exemptions) and extends the deadline for initial reports and updates/corrections for those foreign reporting companies (generally allowing 30 days after the IFR publication or registration date). The Federal Register text describes the extension and the narrowed scope (foreign entities only) and notes FinCEN is accepting comments and may issue a final rule later. C. Definitions and update/correction rules (still relevant for entities in scope): FinCEN’s Reporting Rule definition of beneficial owner remains: an individual who (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the ownership interests. Reporting companies (for those still in scope) must update BOI reports when any required information changes: generally within 30 days after the change occurs. Examples given by FinCEN include a sale that changes who meets the 25% threshold, a new CEO, or death of a beneficial owner. FinCEN provides a voluntary 90-day safe harbor for correcting inaccurate filings if the correction is submitted within 90 days of the original filing deadline; willful failures or false statements remain subject to civil and criminal penalties. D. Ownership dilution specific guidance (how dilution triggers reporting): FinCEN explicitly lists as an example of a required updated report “a sale that changes who meets the 25% ownership interest threshold.” Therefore, dilution events that change whether an individual meets (or ceases to meet) the 25% ownership interest test create a duty to file an updated BOI report within the required timeframe (30 days for entities in scope). Separate from the 25% ownership test, you must reassess for substantial control after governance changes (board composition, officer changes, voting arrangements)—dilution of ownership does not automatically remove substantial control and may still keep someone as a beneficial owner under the 'substantial control' prong. Practitioner commentary highlights uncertainty on how to evaluate “substantial influence” in diluted governance settings; companies should evaluate the facts and document the analysis. E. Practical compliance best practices for US business owners / LLC founders (actionable): Maintain an accurate, detailed cap table that models dilution scenarios (option pools, SAFEs, convertible notes, equity issuances, secondary sales) so you can quickly determine whether any individual crosses the 25% threshold or whether governance changes affect substantial control. Track material governance changes (board appointments/removals, management changes, power-sharing agreements) because substantial control can arise from non-ownership authority. Document the analysis of substantial control and ownership percentages. Use FinCEN identifiers where helpful (optional) and store copies of all BOI filings and supporting documents. If your company is domestic (U.S.-formed): monitor rulemaking and company-specific contract obligations—some companies remain contractually required to file BOI despite the interim final rule exempting domestic companies; also monitor whether FinCEN later re-expands scope in a final rule. If your company is foreign and registered in the U.S.: expect to file or update BOI (including updating within 30 days of dilution that changes 25% status), and follow the FinCEN small-entity guide procedures for corrections and updates. F. Enforcement and legal risk: FinCEN retains enforcement authority for willful failures to report or willful submission of false information; civil penalties (up to $500/day) and criminal penalties (fines and imprisonment) still apply. The small-entity guide outlines enforcement risk and the 90-day safe harbor for voluntary correction. Even with the domestic exemption, contractual obligations or counterparty requirements may still compel filings; companies should review agreements and investor covenants. G. State-specific interactions: The FinCEN rule change is federal and does not change routine state-level business filing obligations (annual reports, LLC member/manager listings, state tax filings). State filings use different forms and authorities—there is no state-level BOI replacement in the mainstream, but companies should verify any specific state legislation or Secretary-of-State guidance requiring additional disclosures. Practically, the federal BOI removal for domestic entities reduces federal BOI filing obligations but does not alter state corporate/LLC reporting.