What Agency Owners Need to Know About Beneficial Ownership Information Reporting Exemptions

The Corporate Transparency Act (CTA) has introduced new reporting requirements for businesses in the United States. While many small- to mid-sized companies are required to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN), certain entities may be exempt from this obligation. Understanding these exemptions is crucial for business owners to ensure compliance and avoid unnecessary administrative burdens.

Criteria for Exemption

To be exempt from BOI reporting requirements, a company must meet specific criteria:

• The company must employ 21 or more full-time employees.

• The company must have reported sales exceeding $5 million on its most recent business tax return.

It’s important to note that both criteria must be met simultaneously for a company to qualify for the exemption. Meeting just one of these requirements is not sufficient to avoid the reporting obligation.

Additional Exempt Entities

While the employment and revenue thresholds are the primary factors for most businesses, certain types of entities are automatically exempt from BOI reporting due to their nature or existing regulatory oversight. 

These include:

• Companies licensed under the Securities and Exchange Act

• Registered banks

• Registered credit unions

These entities are typically subject to other forms of stringent regulatory oversight, which is why they’ve been excluded from the additional BOI reporting requirements.

Verifying Exemption Status

If you believe your company meets the exemption criteria, it’s crucial to verify this status before assuming you’re not required to file. The consequences of failing to file when required can be severe, including significant financial penalties. 

To ensure compliance:

• Consult with your CPA: They can review your financial records and employee count to confirm if you meet the exemption thresholds.
• Speak with your attorney: Legal counsel can provide insight into whether your business structure or licensing status affects your reporting obligations.
• Conduct thorough research: Familiarize yourself with the latest FinCEN guidelines and requirements to stay informed about any changes or updates to the exemption criteria.

The Complexity of Multiple Business Interests

Even if your primary business meets the exemption criteria, it’s essential to consider your entire business portfolio when evaluating your BOI reporting obligations. Many business owners who qualify for exemption with their main entity may still have reporting requirements for other business interests, such as:

• Rental Properties: If you own rental properties through an LLC, each of these LLCs will likely need to file a separate BOI report, regardless of your primary business’s exempt status.

• Side Businesses: Any additional LLCs or business entities you own, even if they’re smaller side ventures, may require BOI reporting.

• Real Estate Holdings: LLCs formed to hold real estate investments typically fall under the reporting requirements, even if they’re not actively managed businesses.

This complexity often catches business owners off guard. It’s not uncommon for an owner of a large, exempt company to discover they still have multiple BOI reporting obligations due to their diverse business interests.

Conclusion

While exemptions from BOI reporting exist for larger businesses meeting specific employee and revenue thresholds, business owners must take a comprehensive view of their entire business portfolio when assessing their reporting obligations. Even if your primary business is exempt, any additional LLCs, real estate holdings, or side ventures may still require BOI reporting to FinCEN.

To ensure full compliance with the Corporate Transparency Act, conduct a thorough review of all your business interests, not just your primary operation. Consult with financial and legal professionals to navigate the complexities of these new reporting requirements. 

By taking a proactive approach to understanding and fulfilling your BOI reporting obligations across all your business entities, you can avoid potential penalties and ensure your entire business portfolio remains in good standing with regulatory authorities.

To discover more about how to get compliant under the new Beneficial Ownership Information regulations, tune in to this episode of The Progressive Agency Podcast to hear more from host Craig Cody.