Who Is Exempt from BOI Reporting? An Easy Guide
As of January 1, 2024, many small businesses need to report information about who owns and controls their company to the US government.
This reporting requirement - known as Beneficial Ownership Information (BOI) Reporting - probably applies to your business, but there are exceptions. Knowing if FinCEN (Financial Crimes Enforcement Network) qualifies your business as a "reporting company" allows you to avoid penalties.
If you're looking for a short answer, your small business most likely needs to file a BOI report with FinCEN. You can do this online using FinCEN’s BOI E-Filing website.
So, who is exempt from BOI reporting? Let's break down what it is, why it matters, and how to figure out if you're exempt from beneficial ownership information reporting.
🚨 IMPORTANT UPDATE!
The government has decided to put this requirement on hold for now, so you don’t need to rush to get it filed anymore.
A federal court in Texas ruled that the BOI reporting requirement was overstepping and might even be unconstitutional. Yikes. Because of this, the government has been blocked from enforcing the rule nationwide.
This means:
If you’ve already filed your BOI report: You’re all set. There’s nothing else to do. The government will just keep it in a cloud somewhere.
If it’s pending or you were about to file: It won’t be processed, so you can cross it off your list.
Of course, the government likes to keep us on our toes, so this could change again in the future. If it does, we’ll update this blog post.
What Is BOI Reporting?
BOI reporting is a new federal requirement created by the Corporate Transparency Act.
When you file a BOI report, you tell the Financial Crimes Enforcement Network (FinCEN) who owns and controls your business.
This includes basic information about your company and details about the people who have significant control or ownership of the business.
The report requires specific information about your business, including:
Company name and address
Tax identification numbers
State of formation
Information about beneficial owners (people who own or control the company)
Each beneficial owner must provide their name, date of birth, address, and an identifying document like a passport or driver's license.
Why BOI Reporting Matters for Small Businesses
BOI reporting has a few important purposes that affect both businesses and the economy as a whole.
The main goal is to help law enforcement prevent and stop financial crimes like money laundering, tax fraud, and other illegal activities that harm legitimate businesses.
As a small business owner, it's VERY important for you to understand BOI requirements because:
There are significant penalties for non-compliance. If you're required to file and don't, you could face high fines and potential criminal charges (including jail time).
The filing deadline depends on when your business was created. If your company was formed before January 1, 2024, you have until January 1, 2025 to file. Companies formed after January 1, 2024, have 30 days from formation to file.
This is an ongoing requirement. If your ownership structure changes, you need to file an updated report within 30 days of the change.
There's no fee for submitting your beneficial ownership information report to FinCEN, so while it's going to take some time to submit your report, at least it's free!
Who Is Required to Report Beneficial Ownership Information?
Most small businesses in the United States must file BOI reports.
So, your business is most likely NOT exempt from BOI reporting.
This requirement applies to corporations, limited liability companies (LLCs), and other companies created by filing documents with a secretary of state or similar office. These entities are called "reporting companies" under the Corporate Transparency Act.
Typically, you must file BOI if your business meets these basic criteria:
It was formed by filing documents with a state office
It conducts business in the US
It's not covered by one of the specific exemptions (more on this later)
Sole proprietorships and general partnerships typically don't need to file BOI reports because they don't file formation documents with state offices. But if you registered a DBA (doing business as) name through a state filing, you might need to report.
Foreign companies also must report BOI if they're registered to do business in the US (and filed documentation with a secretary of state or a similar office).
Learn about other important small business reporting requirements, such as forms 1099-MISC and 1099-NEC.
Who Is Exempt from BOI Reporting?
Some businesses don't need to file BOI reports. The most common exemptions for small businesses include inactive companies, businesses owned by exempt entities, and merged or dissolved companies.
Overall, there are 23 specific exemptions from BOI reporting.
Here's what they are.
Large operating companies: To qualify for this exemption, your company needs to employ 20+ full-time workers in the US, have a physical office, and have filed federal tax returns showing over $5 million in annual sales.
Tax-exempt organizations: This covers organizations that have received tax-exempt status from the IRS, including 501(c)(3) nonprofits, churches, and charitable organizations. They're exempt from BOI because these entities are already heavily regulated and must report detailed information to the IRS about their operations and ownership interests.
Banks and credit unions: This exemption applies to financial institutions insured by the FDIC, federal and state credit unions, and bank holding companies.
Investment companies and advisers: Companies registered with the SEC as investment companies or investment advisers are exempt. Venture capital fund advisers don't have to report beneficial ownership information either.
Insurance companies: Companies licensed and regulated by state insurance authorities don't need to file BOI reports.
Public utilities: Companies providing essential services like electricity, water, natural gas, or telecommunications are exempt (as long as they're regulated by state or federal authorities).
Governmental authorities: All federal, state, tribal, and local government entities are exempt - including any organizations fully owned by these authorities.
Money services businesses: Companies registered with FinCEN as money transmitters and maintaining required state licenses don't need to file.
Securities exchange or clearing agencies: National securities exchanges and clearing agencies registered with the SEC are exempt.
Broker-dealers: Securities brokers and dealers registered with the SEC don't need to file BOI reports.
Accounting firms: Public accounting firms registered under the Sarbanes-Oxley Act are exempt.
Public companies: Companies with securities listed on US stock exchanges or those filing reports under the Securities Exchange Act are exempt.
Pooled investment vehicles: Investment funds and trusts operated or advised by exempt entities don't need to file.
Tax-exempt subsidiaries: Companies wholly owned by tax-exempt entities don't need to file their own BOI reports.
Inactive entities: Companies formed before January 2020 that haven't conducted business, aren't owned by foreign persons, and haven't changed ownership in the past year don't have to file.
Insurance producers: Insurance brokers and agents who primarily sell insurance products and have appropriate licenses don't have to file.
Commodity exchange or clearing organizations: These entities are already heavily regulated by the Commodity Futures Trading Commission, so they don't have to file.
Financial market utilities: These entities don't have to file because they already face extensive reporting requirements.
Charitable trusts: Trusts that operate exclusively for charitable purposes under Section 501(c)(3) don't need to file.
Merged or dissolved entities: Companies that have properly completed merger or dissolution proceedings with state authorities don't have to file.
Subsidiaries of certain exempt entities: Companies controlled or owned by specific exempt entities don't need to file separate reports.
State-licensed insurance producers: Businesses that focus on selling insurance products with appropriate state licenses are exempt.
Grandfathered inactive entities: Companies formed before 2020 with no foreign ownership that meet specific inactivity criteria don't need to file.
So, while there are exceptions, most small businesses WILL need to file BOI reports.
The exemptions mainly apply to larger companies, regulated entities, and specific institutional organizations. If you run a typical small business - like a design studio or a restaurant - you'll likely need to file a BOI report.
How to Determine If You're Exempt from BOI Reporting
It's safe to assume that most small businesses have to file BOI reports. That said, there are a few things you should confirm:
Check your business structure: If you're a sole proprietorship or general partnership that hasn't filed formation documents with your state, you don't need to file.
Review your operations: Large companies with over 20 employees, $5 million in annual sales, and a physical office in the US are exempt.
Consider your regulatory status: If you're regulated by specific federal agencies like the SEC or FDIC, you might be exempt.
Make sure your business is active: Companies formed before 2020 that meet specific inactivity criteria might qualify for exemption.
If none of the above apply to you, you probably need to provide beneficial ownership information to FinCEN.
What to Do If You're NOT Exempt from BOI Reporting
If your business needs to file a BOI report, make sure to do it by the deadline.
If your business was formed before January 1, 2024, you have until January 1, 2025 to file your initial BOI report.
New companies formed after January 1, 2024 must file within 30 days of formation.
If you make any changes to previously reported information, you'll need to update your filing within 30 days of the change.
You can file using FinCEN’s BOI E-Filing website.
You'll need to share key pieces of information about your business, such as your company's legal name, beneficial owner information, and information about the person who filed formation documents when you registered your business.
Many businesses miss their filing deadlines or submit incomplete beneficial owner information, so make sure to double check everything! If you need help, get in touch with us.
What If I Don't File a BOI Report?
Not filing your BOI report on time can trigger serious consequences.
You'll likely have to pay financial penalties - in 2024, there was a $591 PER DAY penalty for not filing your BOI report, and these penalties get adjusted for inflation, so they'll likely be higher in the upcoming years.
There are also criminal penalties with potential imprisonment for up to 2 years.
So, the government takes these filing requirements incredibly seriously. Even unintentional violations can result in penalties, and banks and other financial institutions may require proof of BOI compliance, so not filing on time can affect your business operations as well.
FAQs
Do 501c3 Have to File BOI?
Organizations registered as 501(c)(3) with the IRS are exempt from BOI reporting requirements. These organizations already submit information about their ownership and operations to the IRS, so you don't need to file duplicate reports.
Do Churches Have to File a BOI Report?
No, churches don't have to file BOI reports because they're tax-exempt organizations. Most churches automatically qualify for tax-exempt status under 501(c)(3), even without formal IRS recognition, which means they fall under the tax-exempt organization exemption for BOI reporting.
Do Trusts Have to File BOI?
Most trusts don't need to file BOI reports because they're not created by filing documents with a secretary of state. But business trusts that file formation documents with state offices must file BOI reports unless they qualify for specific exemptions (such as being a charitable trust with a 501(c)(3) status).
Do Sole Proprietors Have to File BOI?
Sole proprietors generally don't need to file BOI reports because they don't file formation documents with state offices. But you might have to do beneficial ownership information reporting if you filed state documents for a DBA.
Does an S-Corp Have to File a BOI?
Yes, S-corporations must file BOI reports unless they qualify for a specific exemption like being a large operating company. The tax election doesn't affect BOI requirements.
Do Nonprofits Have to File a BOI?
If your nonprofit is registered as a tax-exempt organization with the IRS, you don't need to file BOI reports. This includes 501(c)(3) organizations and other tax-exempt nonprofits.
Do Single-Member LLCs Have to File BOI?
Yes, single-member LLCs must file BOI reports because they're created by filing documents with state offices. It doesn't matter how many members your LLC has.
Do Inactive LLCs Need to File BOI?
Inactive LLCs might not need to file if they pass requirements like being formed before January 1, 2020, having no foreign owners, and showing no ownership changes in the past year. If your inactive LLC has foreign owners or has changed owners recently, you need to file.
Do Limited Partnerships Have to File a BOI?
You must file BOI for your limited partnership if it was created by filing documents with a state office (which is typically the case). General partnerships usually don't need to file because they don't require state formation documents.
Find Clarity and Stay on Top of Regulations with Desi Tax®
BOI reporting requirements affect almost all small businesses in the US, likely including yours. If you need help understanding your reporting obligations and maintaining compliance, get in touch with Desi Tax®!
