Wolters Kluwer: Beneficial Ownership Reporting Requirements for Large Operating Companies

With Beneficial Ownership Information (BOI) reporting requirements now in effect as part of the Corporate Transparency Act (CTA), Wolters Kluwer CT Corporation experts responded to a range of questions submitted by businesses and individuals seeking clarity on “large operating company” exemptions.

Wolters Kluwer has published a white paper and created a podcast clarifying the circumstances for which organizations are exempt from the new BOI reporting requirements under the large operating companies category and what this means for their subsidiaries.

Catherine Wolfe, executive vice president and general manager for CT Corporation, points to the complexities in determining whether an organization qualifies for a large operating company exemption — and whether its subsidiaries will be eligible under the “subsidiary of certain exempt entities” exemption. Exempt entities do not have to file a BOI report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

“Determining whether an organization is exempt from the reporting requirements begins with three major factors; however, if subsidiaries are involved, the eligibility calculation takes on added complexity,” Wolfe said.

A large operating company, she explains, must:

  • Employ more than 20 full-time employees in the United States
  • Have an operating presence at a physical office within the U.S.
  • Have grossed more than $5 million in receipts or sales from U.S. sources, as reported in the prior year’s federal tax filing

“Entities that qualify for the large operating company exemption do not need to apply for that status nor do they have to file a BOI report,” Wolfe said. “There is an exemption for subsidiaries of certain exempt entities — including for subsidiaries of large operating companies — where the subsidiary qualifies for an exemption if their ownership interests are controlled or wholly owned, directly or indirectly, by a large operating company.”

Per FinCEN, a subsidiary’s ownership interests must be 100% owned or controlled by an exempt entity to meet the exemption: “If an exempt entity controls some but not all of the ownership interests of the subsidiary, the subsidiary does not qualify.”

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Terry Mulreany
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