All entities created by a filing with the secretary of state or equivalent government office are considered reporting companies unless they meet one of the specific exemptions listed in the Corporate Transparency Act (CTA). Although there are 23 types of entities that are exempt from BOI reporting requirements, they are primarily entities that are otherwise regulated or required to report beneficial ownership information to another government agency. As such, most small businesses do not fall within an exemption to the CTA and are therefore required to file a BOI report with FinCEN.

“My company never conducted or no longer conducts business, so it is not subject to CTA.” Although there is an inactive entity exemption, it consists of 6 very specific requirements, all of which must be satisfied. The entity (a) must have been in existence on or before January 1, 2020, (b) cannot be engaged in active business, (c) may not be owned by a foreign person, (d) may not have had any change in ownership in the preceding 12-month period, (e) may not have sent or received any funds in an amount greater than $1,000 in the preceding 12-month period, and (f) may not hold any assets, including ownership interest in another entity. If a reporting company does not meet every one of the 6 prongs, it does not qualify for the inactive entity exemption.

“My company is dissolved, so it is not subject to CTA.” In an effort to provide clarity, FinCEN recently released FAQs that establish that a reporting company in existence on or after January 1, 2024, when the Beneficial Ownership Information Reporting Requirements became effective, must file a BOI report even if it later formally and irrevocably dissolved. Additionally, FinCEN notes that a company that is administratively dissolved generally does not cease to exist as a legal entity because it has limited continued existence under state law. Administratively dissolved reporting companies are therefore still under the obligation to file a BOI report.

The intent of the CTA is to gather beneficial ownership information for companies that may not otherwise report such information. The regulations written to enforce the CTA are broad and the exemptions are narrowly tailored. Accordingly, most companies fall under the CTA definition of a reporting company and are therefore required to file a BOI report. There are strict penalties for violating the BOI reporting requirements including civil penalties of $591 for each day the violation continues. If you are unsure if your company is a reporting company, try our CTA Exemption Wizard to help you assess whether your company is subject to the CTA’s reporting requirements. If you find that your company must submit a BOI report, use our CTA Beneficial Owner Wizard to determine if you are considered a beneficial owner.