The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) recently issued a new reporting rule. The rule is the Beneficial Ownership “Reporting Rule.” It went into effect on January 1, 2024 and it directly affects some small businesses. Our firm has run a series of posts on the new rule over the past few months. We would like to add one more on who is exempt from reporting.

What Companies Are Exempt?

There are 23 different types of businesses that are exempt from FinCEN’s reporting requirements. Examples include:

• Public companies,
• Banks,
• Securities brokers and dealers,
• Insurance companies,
• Registered investment companies and advisors, and
• Pooled investment companies.

Also exempt are:

• Tax-exempt entities,
• Wholly owned subsidiaries of certain exempt companies,
• Inactive entities, and
• Large operating companies.

What About Nonprofits?

As stated above, tax-exempt entities are exempt from reporting under the new FinCEN rule. This essentially means that public charities, private foundations, and other nonprofits with IRS income tax exemption status don’t have to file a BOI report to FinCEN.

The reasoning for the exemption makes sense. A key component to a BOI report is that a company must disclose its “beneficial owners.” However, nonprofit organizations do not have owners at all. With no owners, a nonprofit’s report would be quite bare.

What About Sole Proprietorships?

Sole proprietors are generally exempt from reporting. The new FinCEN rule directly impacts any entity created by filing business formation documents with a secretary of state or a similar office. However, a sole proprietor does not have to file any documents with a secretary of state or similar office to create or register his or her business. Thus, the business is not subject to reporting.

Are There Resources to Learn More?

Yes. We recommend the following:

• More information regarding the Reporting Rule can be found at fincen.gov/boi.
• FinCEN has issued some FAQs on specific issues and topics. You can find them here: fincen.gov/boi-faqs.
• Keep an eye out for additional blog posts from the Foundry Law Group that go into more detail regarding the reporting requirements.

Still More Questions?

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The attorneys at Foundry Law Group have years of experience in helping businesses form, manage, and protect themselves from risks and concerns. Our team follows the latest developments affecting our clients’ operations, and we apply that knowledge as we build proactive strategies for long-term solutions. We are always here to help so make sure to contact our talented team now!