As the January 1, 2025, deadline approaches for companies to comply with the Corporate Transparency Act’s (CTA) Beneficial Ownership Interest (BOI) reporting requirements, it’s crucial for business owners to clearly understand their obligations. Earlier this year, we provided an overview of the new rule (and related reporting requirements) and shared that many entities will need to report their BOI to the Financial Crime Enforcement Network (FinCEN). In this follow-up post, we’ll clarify which entities are considered “reporting companies” and explore the specific exemptions that may apply.
Is My Business a Reporting Company?
According to FinCEN, there are two types of reporting companies: domestic and foreign. A domestic reporting company is described as a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. As a result, sole proprietorships, many limited liability partnerships and most trusts will not fall under the definition of a reporting company because they were are not created by the filing of a document with a secretary of state.
Does My Business Qualify Under One of the 23 Listed Exemptions?
Even if your business is considered a reporting company, it is important to note that the CTA exempts 23 types of entities from the reporting requirements. An entity that qualifies for any of the following exemptions is not required to report BOI to FinCEN.
| Exemption # | Title | Description |
|---|---|---|
| 1 | Securities reporting issuer | Any issuer of securities that is: (A) an issuer of a class of securities registered under §12 of the Securities Exchange Act of 1934, or (B) required to file supplementary and periodic information under §15(d) of the Securities Exchange Act of 1934. |
| 2 | Governmental authority | Any entity that: (A) is established under the laws of the United States, an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States, and (B) exercises governmental authority on behalf of the United States or any such Indian tribe, State, or political subdivision. |
| 3 | Bank | Any bank, as defined in: (A) Sec. 3 of the Federal Deposit Insurance Act, (B) Sec. 2(a) of the Investment Company Act of 1940, or (C) Sec. 202(a) of the Investment Advisers Act of 1940. |
| 4 | Credit Union | Any Federal credit union or State credit union, as those terms are defined in Sec. 101 of the Federal Credit Union Act. |
| 5 | Depository institution holding company | Any (1) bank holding company as defined in Sec. 2 of the Bank Holding Company Act of 1956, or (2) any savings and loan holding company as defined in Sec. 10(a) of the Home Owners' Loan Act. |
| 6 | Money services business | Any money transmitting business registered with FinCEN under 31 U.S.C. 5330, or any money services business registered with FinCEN under 31 CFR 1022.380. |
| 7 | Broker or dealer in securities | Any broker or dealer, as those terms are defined in Sec. 3 of the Securities Exchange Act of 1934, that is registered under Sec. 15 of that Act. |
| 8 | Securities exchange or clearing agency | Any exchange or clearing agency, as those terms are defined in Sec. 3 of the Securities Exchange Act of 1934, that is registered under Secs. 6 or 17A of that Act. |
| 9 | Other Exchange Act registered entity | Any entity other than that described in exemption 1 (Securities reporting issuer), exemption 7 (Broker or dealer in securities), or exemption 8 (Securities exchange or clearing agency) that is registered with the SEC under the Securities Exchange Act of 1934 |
| 10 | Investment company or investment adviser | Any entity that is: (A) an investment company as defined in Sec. 3 of the Investment Company Act of 1940, or is an investment adviser as defined in Sec. 202 of the Investment Advisers Act of 1940, and (B) registered with the SEC under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. |
| 11 | Venture capital fund adviser | Any investment adviser that: (A) is described in section 203(l) of the Investment Advisers Act of 1940, and (B) has filed Item 10, Schedule A, and Schedule B of Part 1A of Form ADV, or any successor thereto, with the SEC. |
| 12 | Insurance company | Any insurance company as defined in Sec. 2 of the Investment Company Act of 1940. |
| 13 | State-licensed insurance producer | Any entity that: (A) is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State, and (B) has an operating presence at a physical office within the United States. |
| 14 | Commodity Exchange Act registered entity | Any entity that: (A) is a registered entity as defined in Sec. 1a of the Commodity Exchange Act, or (B) is: (1) a futures commission merchant, introducing broker, swap dealer, major swap participant, commodity pool operator, or commodity trading advisor, each as defined in Sec. 1a of the Commodity Exchange Act, or a retail foreign exchange dealer as described in Sec. 2(c)(2)(B) of the Commodity Exchange Act and (2) registered with the Commodity Futures Trading Commission under the Commodity Exchange Act. |
| 15 | Accounting firm | Any public accounting firm registered in accordance with Sec. 102 of the Sarbanes-Oxley Act of 2002. |
| 16 | Public utility | Any entity that is a regulated public utility as defined in 26 USC 7701(a)(33)(A) that provides telecommunications services, electrical power, natural gas, or water and sewer services within the United States. |
| 17 | Financial market utility | Any financial market utility designated by the Financial Stability Oversight Council under Sec. 804 of the Payment, Clearing, and Settlement Supervision Act of 2010. |
| 18 | Pooled investment vehicle | Any pooled investment vehicle that is operated or advised by a person described in exemptions 3 (bank), 4 (credit union), 7 (broker or dealer in securities), 10 (investment company or investment adviser), or 11 (venture capital fund adviser). |
| 19 | Tax-exempt entity | Any entity that is: (A) an organization that is described in Sec. 501(c) of the Internal Revenue Code of 1986 (determined without regard to Sec. 508(a) of the Code) and exempt from tax under Sec. 501(a) of the Code, except that in the case of any such organization that ceases to be described in Sec. 501(c) and exempt from tax under Sec. 501(a), such organization shall be considered to continue to be described as a taxexempt entity for the 180-day period beginning on the date of the loss of such tax-exempt status, (B) a political organization, as defined in Sec. 527(e)(1) of the Code, that is exempt from tax under Sec. 527(a) of the Code, or (C) a trust described in paragraph (1) or (2) of Sec. 4947(a) of the Code. |
| 20 | Entity assisting a tax-exempt entity | Any entity that: (A) operates exclusively to provide financial assistance to, or hold governance rights over, any entity described in exemption 19 above (taxexempt entity), (B) is a United States person, (C) is beneficially owned or controlled exclusively by one or more United States persons that are United States citizens or lawfully admitted for permanent residence, and (D) derives at least a majority of its funding or revenue from one or more United States persons that are United States citizens or lawfully admitted for permanent residence. |
| 21 | Large operating company | Any entity that: (A) employs more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” as used in those sections of the CFR have the meaning provided in 31 CFR 1010.100(hhh), (B) has an operating presence at a physical office within the United States, and (C) filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, as reported as gross receipts or sales (net of returns and allowances) on the entity's IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles. For an entity that is part of an affiliated group of corporations within the meaning of 26 USC 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group |
| 22 | Subsidiary of certain exempt entities | Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described in exemptions 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, or 21 set forth above |
| 23 | Inactive entity | Any entity that: (A) was in existence on or before January 1, 2020, (B) is not engaged in active business, (C) is not owned by a foreign person, whether directly or indirectly, wholly or partially, (D) has not experienced any change in ownership in the preceding twelvemonth period, (E) has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding 12 month period, and (F) does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity. |
How Does My Company File a Report With FinCEN?
All BOI Reports must be filed directly on the FinCEN’s e-filing website at https://boiefiling.fincen.gov/. A finalized PDF containing all required information may be uploaded or the information may be provided using the web-based report. Specific instructions on how to properly complete the reports are provided by FinCEN. Understanding whether your entity is required to file a report with FinCEN is crucial for compliance under the Corporate Transparency Act. If you’re unsure about your status or need further clarification on your obligations, don’t hesitate to seek guidance from your advisors. Staying informed and being proactive is the best way to navigate the complexities of the CTA
