Summary

Although large organizations are generally exempt from filing under the Corporate Transparency Act (CTA), companies must perform a careful analysis to determine whether they have reporting obligations for certain subsidiaries or affiliates.

The Upshot

• The CTA went into effect on January 1, 2024, and requires many entities formed or registered to do business in the U.S. to report information about themselves, their beneficial owners, and their company applicants to the U.S. Treasury’s Financial Crimes and Enforcement Network (FinCEN).
• The CTA includes 23 categories of entities that are exempt from the CTA’s reporting requirements, including public companies, large operating companies, and subsidiaries of certain exempt entities.
• The subsidiary exemption does not apply to subsidiaries that are not wholly owned.

The Bottom Line

Many organizations have complex corporate structures with numerous entities, which may include joint ventures, investments, and entities formed outside the main corporate structure. Companies must perform a CTA analysis for every entity within their corporate structures to determine whether any entities are reporting entities.

The Corporate Transparency Act (CTA) went into effect on January 1, 2024, and requires all entities formed or registered to do business in the United States to file a beneficial ownership information (BOI) report with the U.S. Treasury’s Financial Crimes and Enforcement Network (FinCEN) unless an entity qualifies for one of 23 exemptions under the CTA. Many large organizations qualify for one or more of following exemptions:

• Public Company: Entities that are (a) an issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934 (Exchange Act) or (b) subject to reporting requirements under section 15(d) of the Exchange Act.
• Large Operating Company: Entities that meet all three of the following: (a) employ more than 20 employees on a full-time basis in the U.S., and (b) have an operating presence at a physical office within the U.S., and (c) have previously filed U.S. federal income tax returns demonstrating more than $5 million in gross receipts or sales from U.S. sources on a consolidated basis.
• Subsidiaries of Certain Exempt Entities: Entities whose ownership is controlled or wholly owned, directly or indirectly, by certain exempt entities, including public companies and large operating companies.

Subsidiaries

For entities who qualify for the public company or large operating company exemption, all of their wholly-owned, direct and indirect subsidiaries will also qualify for the subsidiary exemption under the CTA. However, if an exempt public company or large operating company entity has a subsidiary that is not wholly-owned, further analysis must be performed to determine whether that entity qualifies for an exemption under the CTA. Common examples of non-wholly-owned subsidiaries include joint ventures and venture capital or other investments.

Affiliates

In addition to subsidiaries, companies often form affiliate entities outside of their main corporate structure. These affiliates might hold real estate, intellectual property, or certain other assets that are segregated for legal or other purposes. Affiliated entities should be analyzed to determine whether they qualify for an exemption under the CTA.

Do Your Due Diligence

All companies should review and update their structure charts and ownership information. Companies should then carefully consider each entity within their organization to determine whether the entity must file a BOI report with FinCEN or whether it qualifies for an exemption from filing. For entities created before January 1, 2025, the filing deadline is January 1, 2025. Entities created on or after January 1, 2024, have 90 days after creation to file (shortened to 30 days beginning January 1, 2025).

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