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The Corporate Transparency Act (CTA) mandates that many businesses file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN) starting in 2024. These reports disclose details about individuals who own or significantly influence the company. However, there are CTA exemptions: 23 types of entities that are exempt from complying to this filing requirement, one of which is the “large operating company.”This exemption is liable to be one of the most commonly applicable exemption test and is crucial to understand.
CTA Exemptions: Large Operating Company
For a company to qualify as a large operating company and benefit from this exemption, it must meet the following specific criteria:
Employee Count
The company must employ more than 20 full-time employees in the United States. Full-time employees, in this context, work an average of at least 30 hours per week. Parent companies are not allowed to count employees of subsidiaries (or vice versa).
Physical Presence in the US
The company should maintain a physical office within the United States. This means conducting regular business operations at a distinct owned or leased physical location in the US.
Gross Receipts or Sales
The company must have reported more than $5 million in gross receipts or sales in the previous year and reported on an applicable tax return filed in the United States. This threshold doesn’t include receipts or sales from sources outside the US.Notably, this exemption may also extend to certain subsidiaries of large operating companies, provided their ownership interests are controlled by the parent large operating company. Furthermore, if an individual’s ownership in a reporting company is held through exempt entities, the reporting company may report the exempt entities’ names instead of the individual’s personal information.
Are You Prepared to File?
It’s essential for businesses to understand these criteria and exemptions to determine whether they qualify for the large operating company exemption. If a company ceases to meet the criteria, it must file an initial report within 30 days of losing its exemption status.
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