Introduction
The Corporate Transparency Act (CTA), enforced by FinCEN, requires many businesses to file a Beneficial Ownership Information (BOI) report. However, not all companies are required to comply. So, who is exempt from filing a BOI report?
Let’s break down the types of entities that are excluded and what this means for your business.
What Is a BOI Report?
A BOI report discloses information about the individuals who own or control a company. This helps the government prevent financial crimes like money laundering and terrorist financing.
Who Must File a BOI Report?
Generally, the following must file:
- LLCs
- Corporations
- Limited partnerships
- Other entities created or registered to do business in the U.S.
Unless exempt, these entities must file a BOI report with FinCEN.
Who Is Exempt from Filing a BOI Report?
According to FinCEN, 23 types of entities are exempt from BOI reporting. Some of the most common exemptions include:
1. Large Operating Companies
- Have more than 20 full-time U.S. employees
- Maintain a physical office in the U.S.
- Generate over $5 million in U.S.-based revenue
2. Publicly Traded Companies
- Registered under the Securities Exchange Act of 1934
- Subject to SEC reporting requirements
3. Banks and Credit Unions
- Already regulated by federal banking authorities
4. Tax-Exempt Nonprofits
- Recognized under section 501(c) of the Internal Revenue Code
5. Inactive Entities
- Existed before Jan 1, 2020
- Have no assets, no income, and no business activity
6. Registered Investment Companies
- Including mutual funds and hedge funds registered with the SEC
7. Accounting Firms and Insurance Companies
- That are already heavily regulated under state or federal law
Why These Entities Are Exempt
Entities that are already subject to federal or state oversight or have a low risk of being used for illegal activities are not required to submit a BOI report. The law targets smaller, private companies with minimal regulation.
What If You Wrongly Assume You’re Exempt?
If you believe you’re exempt but actually are not:
- You may face civil fines of $500 per day
- You could also incur criminal penalties up to $10,000 or 2 years in prison
It’s critical to consult legal or professional assistance if unsure.
Final Thoughts
Understanding who is exempt from filing a BOI report is crucial for staying compliant with federal law. If your company doesn’t meet the exemption criteria, you must file—even if you’re a small or single-member LLC.
