BOI Exceptions: Large Operating, Inactive, and Subsidiary Entities

As of March 26, 2025, every company formed in the United States is exempt from filing a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network. BOI reporting exemptions now matter primarily for foreign-formed entities that have registered to do business in a U.S. state or tribal jurisdiction, which must still file unless they fall into one of 23 specific categories listed in the regulation.1Financial Crimes Enforcement Network. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons

Domestic Companies Are Currently Exempt

The Corporate Transparency Act, enacted in 2021, originally required most corporations, LLCs, and similar entities created by filing with a secretary of state to submit BOI reports. After court challenges and enforcement pauses, FinCEN issued an interim final rule on March 26, 2025 that removed domestic companies from the reporting requirement entirely. The revised definition of “reporting company” now covers only entities formed under the law of a foreign country that have registered to do business in any U.S. state or tribal jurisdiction.2Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting

“Interim final” means the rule took effect immediately but could still be revised before it becomes permanent. FinCEN has accepted public comments and indicated it intends to finalize the rule, and Treasury has separately signaled that any future rulemaking will continue to limit BOI reporting to foreign reporting companies.1Financial Crimes Enforcement Network. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons If that changes, the 23 categorical exemptions already on the books would once again determine which domestic entities have to file.

Foreign Reporting Companies Still Have to File

A foreign-formed entity registered to do business in a U.S. state or tribal jurisdiction is still a reporting company unless one of the 23 exemptions applies. Entities registered before March 26, 2025 had 30 days from that date to file. Those registering on or after that date have 30 calendar days after receiving notice that their registration is effective.1Financial Crimes Enforcement Network. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons

One important carve-out: even foreign reporting companies are not required to report any U.S. persons as beneficial owners, and U.S. persons are not required to report BOI for any foreign entity in which they hold an ownership interest.1Financial Crimes Enforcement Network. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons

The 23 Exemption Categories

The Corporate Transparency Act’s implementing regulation at 31 C.F.R. § 1010.380(c)(2) lists 23 types of entities that are not reporting companies regardless of where they were formed:3eCFR. 31 CFR 1010.380 – Reports of Beneficial Ownership Information

  • Securities reporting issuer
  • Governmental authority
  • Bank
  • Credit union
  • Depository institution holding company
  • Money services business
  • Broker or dealer in securities
  • Securities exchange or clearing agency
  • Other Exchange Act registered entity
  • Investment company or investment adviser
  • Venture capital fund adviser
  • Insurance company
  • State-licensed insurance producer
  • Commodity Exchange Act registered entity
  • Accounting firm
  • Public utility
  • Financial market utility
  • Pooled investment vehicle
  • Tax-exempt entity
  • Entity assisting a tax-exempt entity
  • Large operating company
  • Subsidiary of certain exempt entities
  • Inactive entity

The common logic across all 23 is redundancy: the entity is already subject to enough federal or state oversight that a separate BOI filing would duplicate information regulators already hold. Publicly traded issuers disclose ownership through SEC filings. Banks, credit unions, broker-dealers, and registered investment advisers operate under anti-money laundering programs and periodic examinations. State insurance departments vet insurance company officers and significant shareholders before granting a license. Tax-exempt organizations report officers and key employees on IRS Form 990.4Internal Revenue Service. Instructions for Form 990 Public utilities operate under state or federal utility commission oversight with public rate-setting.

Three exemptions deserve a closer look because their tests are strict, and most questions from business owners land on one of them.

Large Operating Company

This is the exemption most commonly evaluated by mid-size businesses. To qualify, an entity must pass a three-part test at the same time:5Financial Crimes Enforcement Network. Frequently Asked Questions

  • More than 20 full-time employees in the United States
  • A physical office in the United States that the entity owns or leases, physically distinct from any unaffiliated entity’s place of business
  • More than $5,000,000 in gross receipts or sales on a federal income tax or information return filed for the previous year, not counting receipts from foreign sources

All three prongs must be satisfied. A company with 25 employees and $8 million in domestic revenue still fails if it operates out of a co-working space it doesn’t lease independently. The IRS defines a full-time employee as someone who averages at least 30 hours of service per week, or 130 hours per month.6Internal Revenue Service. Identifying Full-Time Employees

The revenue figure must appear on an actual filed return for the prior year. Projections don’t count. A company with $7 million in total revenue but $3 million from overseas operations would only count $4 million and would fall short.

Inactive Entity

The inactive entity exemption looks simple but has the strictest requirements of any category. All six conditions must be met:5Financial Crimes Enforcement Network. Frequently Asked Questions

  • The entity existed on or before January 1, 2020
  • It is not engaged in active business
  • It is not owned by any foreign person, directly or indirectly, wholly or partially
  • There has been no change in ownership in the preceding 12 months
  • No financial transactions exceeding $1,000 have been sent or received in the preceding 12 months, including through any account the entity or an affiliate had an interest in
  • The entity holds no assets of any kind, in the U.S. or abroad, including ownership interests in other entities

The last requirement is where most companies trip up. A dormant LLC that still owns a trademark, holds a bank account with a small balance, or retains a partial interest in another company fails the test. This exemption is designed for truly defunct entities that simply haven’t been formally dissolved.

Subsidiary of an Exempt Entity

An entity qualifies for the subsidiary exemption if its ownership interests are wholly owned or entirely controlled by one or more exempt entities.3eCFR. 31 CFR 1010.380 – Reports of Beneficial Ownership Information “Entirely” means 100 percent. An entity that is 99 percent owned by an exempt bank and 1 percent owned by a non-exempt individual does not qualify. A single non-exempt minority owner anywhere in the ownership structure disqualifies the subsidiary.

Partial control by an exempt parent is not enough either. The exempt entity or entities must control all of the subsidiary’s ownership interests. Each entity in a corporate family has to be evaluated on its own.

Tax-Exempt and Governmental Entities

Organizations exempt from federal income tax under section 501(a) of the Internal Revenue Code, political organizations under section 527, and certain charitable trusts fall under the tax-exempt entity exemption.3eCFR. 31 CFR 1010.380 – Reports of Beneficial Ownership Information An entity that exists solely to provide financial assistance or governance support to a tax-exempt organization has its own separate exemption, subject to ownership and control criteria. If the IRS revokes an organization’s tax-exempt status, it would lose this exemption.

The governmental authority exemption covers any entity established under the laws of the United States, an Indian tribe, a state, or a political subdivision that exercises governmental authority on behalf of one of those bodies. This includes tribally chartered corporations and state-chartered tribal entities exercising governmental functions.5Financial Crimes Enforcement Network. Frequently Asked Questions An entity formed under tribal law that does not exercise governmental authority is treated like any other entity. If it was created by filing with a tribal office that routinely forms such entities, FinCEN considers it a reporting company subject to the same rules and exemptions as any other business.

Penalties If You Should Have Filed and Didn’t

The statutory penalties in 31 U.S.C. § 5336 remain on the books for any entity actually required to report. Willfully failing to file, or providing false information, carries:7Office of the Law Revision Counsel. 31 USC 5336 – Beneficial Ownership Information Reporting Requirements

  • Civil penalties up to $500 per day the violation continues
  • Criminal fines up to $10,000, imprisonment up to two years, or both

The statute also includes a safe harbor. If you file a report and later realize it contains inaccurate information, you can correct it within 90 days without penalty, as long as you weren’t acting to evade the reporting requirement and didn’t have actual knowledge of the inaccuracy at the time of filing.7Office of the Law Revision Counsel. 31 USC 5336 – Beneficial Ownership Information Reporting Requirements

Because the interim final rule is not the last word, business owners who previously relied on one of the 23 categorical exemptions rather than the blanket domestic exemption should keep an eye on FinCEN’s website for the final rule.