Understanding FinCEN's Inactive Company Definition
The definition of an inactive company for the purposes of a Beneficial Ownership Information (BOI) filing with the Financial Crimes Enforcement Network (FinCEN) is quite specific. According to the Corporate Transparency Act (CTA) and FinCEN's regulations, an inactive entity must meet certain criteria to be exempt from reporting beneficial ownership information.
An entity qualifies for the inactive entity exemption if all six of the following criteria are met
- The entity was in existence on or before January 1, 2020.
- The entity is not engaged in active business.
- The entity is not owned by a foreign person, whether directly or indirectly, wholly or partially. “Foreign person” means a person who is not a United States person. A “United States person” is defined in section 7701(a)(30) of the Internal Revenue Code of 1986 as: a citizen or resident of the United States; domestic partnership; a domestic corporation; and certain estates and trusts.
- The entity has not experienced any change in ownership in the preceding twelve-month period.
- The entity 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.
- The entity 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.
These criteria must all be met for an entity to be considered inactive and exempt from the BOI reporting requirements. This exemption is meant to reduce the reporting burden on entities that no longer actively conduct business or have any assets or activities.
It is essential to ensure that all criteria are met, as failing to report when required or incorrectly claiming an exemption can lead to penalties. It is important to note that the definition of an inactive entity for BOI reporting is exclusive to FinCEN and does not apply to the classification of an inactive company by the Delaware Division of Corporations.
If a company is uncertain whether it qualifies as inactive for FinCEN's Beneficial Ownership Information (BOI) filing, it should seek guidance to ensure compliance. Here are steps to take to find the answers for your situation:
- Work with https://fincenreport.com/ to help determine if your company is eligible for a BOI exemption. They will offer a seamless platform for companies to file Beneficial Ownership Information (BOI) in compliance with the Corporate Transparency Act (CTA)
- Consult with Legal Counsel:
- Contact an attorney, as they can provide advice tailored to the specific circumstances of the company.
- Contact FinCEN:
- FinCEN provides resources and assistance for entities required to comply with BOI reporting. Companies can reach out directly to FinCEN for clarification on the requirements.
- FinCEN Contact Information:
- Phone: 1-800-767-2825
- Email: FRC@fincen.gov
- Web Inquiry https://www.fincen.gov/contact
- Review FinCEN Resources:
- FinCEN’s website https://www.fincen.gov/boi/small-business-resources offers guidance documents, FAQs, and other resources that can help clarify the requirements and exemptions under the Corporate Transparency Act (CTA).
- Consult with an Accountant:
- An accountant with experience in corporate filings and compliance can also provide valuable insights for the company’s situation.
Taking these steps can help ensure that the company accurately determines its BOI exemption status and complies with the necessary reporting requirements. If you haven't completed your initial Beneficial Ownership Report, start now by visiting https://mcd.delawareinc.com/fincen-report. Our team will try to make the process extremely easy!
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