23 Corporate Transparency Act Exemptions

23 Corporate Transparency Act Exemptions

Date added: November 5th, 2023

Understanding the Corporate Transparency Act (CTA) can initially appear difficult, but 23 exemptions outlined in the CTA may mean your company does not have to report.

Who is Obligated to Report?

Starting January 1, 2024, under the Corporate Transparency Act, a majority of small businesses across the United States will be required to file Beneficial Ownership Information reports with the Financial Crimes Enforcement Network (FinCEN). These crucial reports must identify beneficial owners, defined as individuals holding a minimum of 25% ownership in the company. Failing to adhere to this mandate could result in steep penalties up to $10,000, and may include both financial and criminal consequences. You can find more information on corporatetransparencyact.org.

Understanding Reporting Companies

A closer examination of the Corporate Transparency Act (CTA) reveals a layered regulatory landscape where the obligations vary across different business entities. Central to this framework is the concept of a ‘reporting company.’

Defined by the CTA, a reporting company is any business within the United States that does not fall under any of the act’s 23 enumerated exemptions. Simply put, unless a business entity satisfies the criteria for exemption under the CTA, it assumes the status of a reporting company.

Such entities are bound by the CTA to file Beneficial Ownership Information reports with the Financial Crimes Enforcement Network (FinCEN). These reports are designed to unmask the identities of those who own, control, or significantly influence the company’s operations — specifically, any individual with a quarter or more stake in the company or significant decision-making clout.

Grasping this differentiation between reporting companies and those exempt is crucial for business entities to navigate and adhere to the stipulations of the Corporate Transparency Act effectively.

Assisting Others in CTA Compliance

Law and accounting firms can help their clients navigate the complexity of the Corporate Transparency Act and ensure compliance with its provisions. These firms can use tools like FincenFetch to file reports for any number of clients. This user-friendly platform empowers law and accounting firms to streamline their client services by efficiently assessing whether their clients qualify for any of the 23 exemptions established under the Corporate Transparency Act.

By leveraging FincenFetch, these firms can conduct thorough evaluations of their clients’ eligibility for exemptions, saving time and resources that would be spent on manual assessments.

How Do I Know If My Business Qualifies for Exemptions?

The CTA offers 23 filing exemptions, providing relief from some or all reporting obligations. These exemptions include:

  1. Large operating company (over 20 employees and $5MM in annual sales)
  2. Inactive entity created before 1/1/2020 that holds no assets, is not engaged in any business, has no foreign owners, and has not sent or received money or changed ownership in the prior 12 months.
  3. Registered Bank
  4. Registered Credit union
  5. Registered Depository institution holding company
  6. Registered Money services business
  7. SEC-registered Broker or dealer in securities
  8. SEC-registered Securities exchange or clearing agency
  9. Other Exchange Act registered entity 
  10. SEC-registered Investment company or investment adviser
  11. SEC-registered Venture capital fund adviser 
  12. Registered Insurance company
  13. State-licensed insurance producer 
  14. Company registered under the Commodity Exchange Act
  15. registered Accounting firm 
  16. Public utility company
  17. Financial market utility designated by the Financial Stability Oversight Council.
  18. Pooled investment vehicle operated by an SEC registered person.
  19. Tax-exempt entity 
  20. Entity that exclusively exists to provide financial assistance or governance to a tax-exempt entity.
  21. Securities reporting issuer
  22. Subsidiary of certain exempt entities
  23. Governmental authority

If your company’s previously granted exemption no longer applies, it is critical that you file a Beneficial Ownership Information (BOI) report within 30 calendar days of losing the exemption status.

As the landscape of corporate transparency evolves, staying informed and utilizing the resources available will ensure that your business or practice remains efficient and compliant. We encourage you to explore the exemptions, stay updated on any regulatory changes, and leverage the tools designed to simplify the process. With the proper knowledge and assistance, the path to compliance under the Corporate Transparency Act becomes achievable and straightforward.

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