For those of you following our Transparency-is-in-Your-Future series, you already know that the Corporate Transparency Act (“CTA”) went into effect on January 1, 2024 and now entities of all shapes and sizes are scrambling to figure out what information they need to report and when, or if they are perhaps exempt from the reporting requirements altogether.

As an update, the CTA (31 CFR 1010.380) was revised to provide a new reporting schedule for filing an initial report with U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). as outlined below:

Additionally, a reporting company must file a report within 30 calendar days after the date that (x) a change in beneficial ownership occurs or (y) the reporting company becomes aware or has reason to know of an inaccuracy in its report.

We now turn our focus to reporting companies and the 23 exemptions established in the CTA.

What is a reporting company under the CTA?

The term “reporting company” includes any entity created (or, for an entity formed under the laws of a foreign country, registered to do business in the US) by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. Accordingly, if not otherwise exempt, reporting companies include corporations, limited liability companies, limited partnerships, limited liability partnerships and limited liability limited partnerships (where they exist), and potentially other professional service entities.

What entities are exempt from reporting under the CTA?

The term “reporting company” does not include (each of which is described in more detail below):

What is an “investment company or investment adviser” under the CTA?

Any entity that is: (a) an investment company as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), or is an investment adviser as defined in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2); and (b) Registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq. ) or the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.).

What is a “venture capital fund adviser” under the CTA?

Any investment adviser that: (a) is described in section 203(l) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(l)); and (b) has filed Item 10, Schedule A, and Schedule B of Part 1A of Form ADV, or any successor thereto, with the Securities and Exchange Commission.

What is an “accounting firm” under the CTA?

Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212).

What is a “pooled investment vehicle” under the CTA?

Any pooled investment vehicle that is operated or advised by a bank, credit union, broker or dealer in securities, investment company or adviser, or venture capital fund adviser, each as defined in the CTA.

What is a “tax exempt entity” under the CTA?

Any entity that is:

(a)          an organization that is described in section 501(c) of the Internal Revenue Code of 1986 (Code) (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code, except that in the case of any such organization that ceases to be described in section 501(c) and exempt from tax under section 501(a), such organization shall be considered to continue to be exempt for the 180-day period beginning on the date of the loss of such tax-exempt status;

(b)          a political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a) of the Code; or

(c)          a trust described in paragraph (1) or (2) of section 4947(a) of the Code.

What is an “entity assisting a tax exempt entity” under the CTA?

Any entity that:

(a)          operates exclusively to provide financial assistance to, or hold governance rights over, any entity described as a “tax exempt entity” under the CTA;

(b)          is a United States person;

(c)          is beneficially owned or controlled exclusively by one or more United States persons that are United States citizens or lawfully admitted for permanent residence; and

(d)         derives at least a majority of its funding or revenue from one or more United States persons that are United States citizens or lawfully admitted for permanent residence.

What is a “large operating company” under the CTA?

Any entity that:

(a)          employs more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” means “the States of the United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), and the Territories and Insular Possessions of the United States” (such as Puerto Rico, U.S. Virgin Islands, Guam, etc.);

(b)          has an operating presence at a physical office within the United States; and

(c)          filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, as reported as gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles.

                For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group. However, the large operating company exemption requires that the entity itself employ more than 20 full-time employees in the United States and does not permit consolidation of this employee count across multiple entities.

What is a “subsidiary of certain exempt entities” under the CTA?

Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described in the CTA, except for a money services business or a pooled investment vehicle, or an entity assisting a tax exempt entity as defined under the CTA.

What is an “inactive entity” under the CTA?

Any entity that:

(a)          was in existence on or before January 1, 2020;

(b)          is not engaged in active business;

(c)          is not owned by a foreign person, whether directly or indirectly, wholly or partially;

(d)         has not experienced any change in ownership in the preceding twelve month period;

(e)          has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding twelve month period; and

(f)           does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.

How does a company report to FinCEN that it is exempt?

A company does not need to report to FinCEN that it is exempt from the BOI reporting requirements if it has always been exempt.

If a company filed a BOI report and later qualifies for an exemption, that company should file an updated BOI report to indicate that it is newly exempt from the reporting requirements. Updated BOI reports are filed electronically though the secure filing system. An updated BOI report for a newly exempt entity will only require that the entity: (1) identify itself; and (2) check a box noting its newly exempt status.

Alternatively, if a company no longer qualifies for an exemption, it must file a BOI report within 30 calendar days after the date that it no longer meets the criteria for any exemption.


Entities should review the CTA and FinCEN regulations to confirm whether they must file a BOI report or are eligible for an exemption. Each entity that is a reporting company should collect the necessary information for itself and its beneficial owners. To ensure compliance with these regulations, all entities should review their internal procedures and organizational documents. Ideally, an entity’s corporate governance documents (e.g. shareholders’ agreement, operating agreement, partnership agreement, etc.) will (1) require its owners to timely disclose the information required to be provided under the CTA (or other applicable federal or state laws, such as the newly enacted NY LLC Transparency Act), (2) provide for consequences for failing to do so, and (3) provide that the entity can disclose the information to FinCEN or as otherwise required by applicable law.

For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.