If you’re wondering whether your business needs to file the new beneficial ownership information report (BOIR), then Corporate Transparency Act exemptions might be at the top of your mind. Does your business need to submit a BOIR, or are you an exempt reporting company?
In this guide, we’ll walk you through the essentials of the Corporate Transparency Act, including the 23 business entities that are exempt from the requirement to report beneficial ownership information.
Who’s exempt from the CTA?
A significant number of businesses are required to report beneficial ownership information; under the terms of the act, they’re called a reporting company. In general, a limited liability company or a corporation is one of the most commonly required businesses. But pretty much any business entity that files formation paperwork or a registration document with a Secretary of State or similar office will be classified as a domestic reporting company or foreign reporting company. They’ll need to submit information about their ownership interests.
But there are quite a few exemptions from the Corporate Transparency Act — 23 of them, to be exact. We’ll explain them here, but you can find the full details of the exemptions in FinCEN’s Small Entity Compliance Guide. With that in mind, let’s walk through what the exemptions are.
1. Securities Reporting Issuer
Businesses that qualify as securities reporting issuers are not required to submit a BOIR because they have already registered ownership information with the SEC.
2. Governmental Authority
Many government organizations are exempt from the ownership interest reporting requirements. To qualify, the business has to be organized under national or state laws, or the laws of an Indian tribe. Interstate compacts can also qualify.
3. Bank
If an organization qualifies as a bank under the terms of the Federal Deposit Insurance Act, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, then it qualifies for an exemption from the BOIR requirement.
4. Credit Union
Businesses that can be classified as credit unions (as defined by the Federal Credit Union Act) don’t need to report their beneficial owners. Federal credit unions and state credit unions both qualify.
5. Depository Institution Holding Company
A bank holding company or a savings and loan holding company may be exempt from the BOIR. To qualify, these groups must meet the definitions set out in the Bank Holding Company Act or the Home Owners’ Loan Act.
6. Money Transmitter Business
Money transmitter businesses are exempt from the new BOIR because they are already required to register with FinCEN.
7. Broker or Securities Dealer
To qualify for an exemption from the BOIR, brokers and securities dealers must meet two criteria. First, they have to match the definitions set out in the Securities Exchange Act. They also have to be registered (as set out in Section 15 of that act).
8. Securities Exchange or Clearing Agency
If a business is a securities exchange or clearing agency, it also has to meet two criteria to be exempt from reporting companies. The first requirement is matching the definition set out in the Securities Exchange Act. They also have to register, as dictated by that act.
9. Other Entity Registered Under the Exchange Act
There are a few business entities that are required to register in accordance with the Securities Exchange Act that haven’t already been listed. Those entities are also exempt from the BOIR requirement.
10. Investment Company or Investment Adviser
Businesses that meet the terms set out in the Investment Company Act or the Investment Advisers Act, qualifying as an investment company or investment adviser respectively, are exempt from the BOIR. Under those acts, they’re required to complete a different registration with the Securities and Exchange Commission.
11. Venture Capital Fund Adviser
If a venture capital fund has filed Form ADV with the Securities and Exchange Commission, there’s a good chance they’re exempt from the BOIR. They must have filled out these sections, however:
- Item 10
- Schedule A
- Schedule B
12. Insurance Company
An insurance company qualifies as exempt from reporting requirements as long as they meet the definition set out in the Investment Company Act of 1940.
13. State-Licensed Insurance Producer
If an insurance producer has been approved by its state insurance commissioner, it’s probably exempt from the BOIR. The insurance producer must also have a physical office where they conduct business in the United States.
14. Commodity Exchange Act Registered Entity
The Commodity Exchange Act requires quite a few entities to register. These entities are exempt from the BOIR.
15. Public Accounting Firm
Under the terms of Sarbanes-Oxley Act of 2002, public accounting firms already complete a different registration. As a result, they aren’t required to file beneficial ownership reports.
16. Public Utility
Regulated public utilities are exempt from the BOIR if they provide one of the following services to the public:
- Telecommunications
- Electric power
- Natural gas
- Water
- Sewer services
17. Financial Market Utility
The Payment, Clearing, and Settlement Supervision Act clearly defines what constitutes a financial market utility. If an entity meets those criteria, it’s exempt from BOIR requirements.
18. Pooled Investment Vehicle
An entity qualifies as a pooled investment criteria if it meets certain criteria, such as:
- The entity meets the definition of an investment company as detailed in the 1940 Investment Company Act (includes some exceptions)
- The entity is owned or operated by one of these exempt entities: bank, credit union, broker or dealer in securities, investment company or adviser, or venture capital fund adviser
To be exempt from the BOIR, the entity has to meet both of the above criteria.
19. Tax-Exempt Entity
If a business is exempt from federal income tax, there’s a good chance they’re also exempt from the BO report requirement, too. If a business meets any of these four criteria, then they qualify for an exemption from the BOIR:
- Qualifies as tax-exempt under the 501(c) codes
- Qualified as tax-exempt, but lost the exemption within the last 180 days
- Qualifies as exempt because it’s a political organization under section 527(e)(1)
- Qualifies as a trust under section 4947
The code for tax exemptions is pretty detailed, so if you’re wondering whether your business qualifies, we highly recommend chatting with a tax professional.
20. Entity Assisting Another Tax-Exempt Entity
Certain businesses that aid tax-exempt businesses also qualify for an exemption from the BOIR. To qualify, they have to meet all four of these criteria:
- The entity exists for the express purpose of helping or governing an exempt entity
- Section 7701(a)(30) defines the entity as a “U.S. person”
- The entity is run exclusively by U.S. residents or persons granted permanent residence
- A majority of the entity’s funding comes from U.S. residents or permanent residents
All four criteria must be met to qualify for a BOIR exemption.
21. Large Operating Company
Certain large operating companies are exempt from filing the BOIR. Here are FinCEN’s criteria for a large company:
- The company has more than 20 full-time employees (permanent workers who work an average of 30 hours per week)
- More than 20 of the employees are employed within the U.S.
- The entity has a physical operating presence in the U.S.
- The entity’s last tax return reflected $5,000,000 or more in gross receipts or sales
- Those gross receipts were reported on Form 1120, Form 1120-S, or Form 1065
- Any income from outside the U.S., when excluded, does not reduce the company’s gross receipts below $5,000,000
An entity has to meet all of these requirements in order to qualify for a large company exemption.
22. Subsidiary of Certain Exempt Entities
If an entity is completely owned or controlled by another exempt entity, then you might also be exempt. Here are the exempt entities that qualify:
- Securities reporting issuer (Exemption 1)
- Governmental authority (Exemption 2)
- Bank (Exemption 3)
- Credit union (Exemption 4)
- Depository institution holding company (Exemption 5)
- Broker or dealer in securities (Exemption 7)
- Securities exchange or clearing agency (Exemption 8)
- Other exchange act registered entity (Exemption 9)
- Investment company or investment adviser (Exemption 10)
- Venture capital fund adviser (Exemption 11)
- Insurance company (Exemption 12)
- State-licensed insurance producer (Exemption 13)
- Commodity Exchange Act registered entity (Exemption 14)
- Accounting firm (Exemption 15)
- Public utility (Exemption 16)
- Financial market utility (Exemption 17)
- Tax-exempt entity (Exemption 19)
- Large operating company (Exemption 21)
These businesses are exempt from the BOIR requirement because their ownership information has already been addressed in the paperwork of the entity that owns them.
23. Inactive Entities
Certain businesses are exempt from the BOIR because they’re no longer operating. To qualify for this exemption, the entity had to be registered to do business prior to January 1, 2020. It can’t be actively engaged in business, had any ownership changes in the last 12 months, or received any funds exceeding $1,000 in the last year. The business also can’t hold any other assets.
If an inactive entity meets those criteria, it can qualify for an exemption.
So my reporting company is exempt. What should I do?
If you’ve determined that your business is one of FinCEN’s exempt entities, then you can’t just stop filing a BOI report. Instead, you need to let FinCEN know that your reporting company is exempt.
To do so, you can use FinCEN’s E-Filing portal (or manually file the PDF version of the BOI report). But instead of filing information about your beneficial owners and company applicants, you’ll select the “Newly exempt entity” category and fill in the appropriate information there. By filing this version of the report, you’ll alert FinCEN that you’re exempt from reporting requirements, avoiding any penalties down the line.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) was first created in 2019, but its terms became active at the beginning of 2024. Under the terms of the act, many business entities are required to file a beneficial ownership information report with the Financial Crimes Enforcement Network (FinCEN).
The Act strives to prevent fraud and terrorism by making money laundering more difficult. Since the act requires every company to report the identities of every owner who substantially benefits from or exerts substantial control over the business, it makes it harder for organizations to use shell companies to hide money laundering and financial crimes.
Failing to file a BOI report can have hefty civil and criminal penalties. Civil penalties can include a fee of $500 per day for every day the report is outstanding. Criminal penalties (which can stack with civil penalties) can include a fine of up to $10,000, 3 years in prison, or both.
What’s the deadline for reporting beneficial ownership information?
Since the Corporate Transparency Act is still pretty new, the filing deadline is still a bit unusual. For now, there are actually three potential deadlines, all depending on when your business was created.
Businesses that started prior to January 1, 2024, need to file their BOIR paperwork sometime before January 1, 2025. Meanwhile, businesses that organize during the 2024 calendar year will have 90 days after receiving “actual or public notice” that their business has been approved. Typically, this means 90 days after your Secretary of State notifies you that your paperwork was accepted and active.
Finally, any businesses that organize after January 1, 2025, will be required to file their BOIR within 30 days of their company’s registration approval.
Note: these due dates apply for both domestic reporting companies and foreign reporting companies.
Try ZenBusiness
If you’re not among the exceptions listed above and are feeling anxious about filing your beneficial ownership information report, we can help. Our ZenBusiness BOF service can help you comply with the Corporate Transparency Act. We can also help you start and maintain your business. Whether you need help starting an LLC or corporation, a platform to manage your finances, or peace of mind that your business is compliant, we can help. Let us handle the red tape side of things so you can focus on growing your business.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
