Recently, we introduced you to the new beneficial ownership information reporting requirements business owners need to be aware of. If you missed that post, find it here to ensure you’re all caught up before we dive into whether or not your company needs to report.

What is a BOI Reporting Company: Quick Recap

Before we discuss helping you determine if your company must report beneficial ownership information, let’s quickly recap what a BOI reporting company is.

In short, it refers to any legal entity subject to anti-money laundering regulations and must report the individuals who ultimately own or control the company.

This includes:

  • Corporations
  • LLCs
  • Partnerships
  • Trusts
  • Similar entities

Is My Company a Reporting Company?

Understandably, a lot weighs on the answer to this question. After all, if you fail to comply with reporting requirements, there could be serious consequences for your business.

So, let’s break it down and determine whether or not your company is considered a “reporting company” by the Financial Crimes Enforcement Network (FinCEN).

According to the Reporting Rule, all “reporting companies” must file beneficial ownership information (BOI) reports with FinCEN within specified timeframes. But what exactly is a “reporting company”?

There are two categories of reporting companies: domestic and foreign.

1. Domestic reporting company

A domestic reporting company is an entity registered in the United States subject to reporting requirements regarding its beneficial ownership. It must report information about individuals who own or control a specific percentage of the entity.

Exemptions exist for certain types of entities, but if an entity doesn’t qualify for an exemption and meets the criteria, it must comply with the reporting rules outlined by the Financial Crimes Enforcement Network (FinCEN) to enhance transparency and combat financial crimes. Failure to comply may result in legal consequences.

2. Foreign reporting company

On the other hand, a foreign reporting company is an entity registered outside the United States with ties to the country. For example, it may have a branch or office within its borders. Similar to domestic reporting companies, they must also report beneficial ownership information if they meet specific criteria. Failure to comply could result in penalties and legal action.

So, what happens if your company doesn’t fall under either of these categories?

Other entities

If your company does not meet the definition of a “domestic reporting company” or a “foreign reporting company,” it doesn’t necessarily mean it’s exempt from all BOI reporting requirements. You may still be subject to other regulations and laws enforced by FinCEN, so stay informed and up-to-date on any changes that may affect your company—an excellent place to start is consulting with a Denver business lawyer like those at Contiguglia Law.

Even if your entity is exempt from reporting requirements, maintaining accurate and up-to-date records of beneficial ownership information for internal purposes and demonstrating transparency and compliance with anti-money laundering measures is necessary.

Ultimately, all companies, regardless of their classification, must ensure they comply with relevant laws and regulations.

Who is Exempt?

Just as important as knowing if your company is a reporting company, it’s also helpful to understand some of the common exemptions to reporting.

FinCen shares a helpful table of 23 exemptions:

  1. Securities reporting issuer
  2. Governmental authority
  3. Bank
  4. Credit union
  5. Depository institution holding company
  6. Money services business
  7. Broker or dealer in securities
  8. Securities exchange or clearing agency
  9. Other Exchange Act registered entity
  10. Investment company or investment adviser
  11. Venture capital fund adviser
  12. Insurance company
  13. State-licensed insurance producer
  14. Commodity Exchange Act registered entity
  15. Accounting firm
  16. Public utility
  17. Financial market utility
  18. Pooled investment vehicle
  19. Tax-exempt entity
  20. Entity assisting a tax-exempt entity
  21. Large operating company
  22. Subsidiary of certain exempt entities
  23. Inactive entity

However, falling under one category does not automatically mean you’re exempt. Under each category, FinCen shares various exemptions that each business must fill out to determine whether they are exempt.

What is an exempt beneficial owner?

For example, let’s consider Exemption #2 (governmental authority). To indeed be exempt from being a reporting company, FinCen outlines two criteria they must meet:

They only qualify for the exemption if both of these conditions apply:

  • The entity is established under the laws of the United States, an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States.
  • The entity exercises governmental authority for the United States or any Indian tribe, State, or political subdivision.

Final Words on BOI: Does Your Company Have to Report?

This article covers some primary considerations and exemptions, but FinCen has provided detailed guidance for all listed entities on its website. Remember, even if your company falls under one of these categories, there may still be reporting requirements depending on the nature of your business and any financial transactions you engage in. Ultimately, each entity is responsible for determining its BOI status.

Contact us at Contiguglia Law to help guide you and your business through this process. Keep up with FinCEN’s updates (they also have a helpful FAQ here), and stay in touch with your legal advisors at Contiguglia Law to ensure your BOI status is accurately reported.

In the next post in this series, we tell you who qualifies as a beneficial owner.

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