[ddmitriev]

[1] lists exceptions in section 8. Mostly, they are entities that are already subject to substantially more stringent reporting requirements such as banks, entities registered with the SEC, and so on:

> Many of these exempt entities are already regulated by federal and/or state government, and many already disclose their beneficial ownership information to a governmental authority.

The one exemption that I found unexpected was the following:

> (xxi) Large operating companies with more than 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States.

It's not clear to me why such entities need to be excluded from reporting. It's true that they are much less likely to be shell companies, but still...why? Also, get below $5M one year or let go of your 21st employee, and get ready for the left-field fine from FinCEN.

[1]: https://www.fincen.gov/sites/default/files/shared/BOI_FAQs_F...

[LegionMammal978]

The exemption for "large operating companies" was adapted straight from the text of the 2019 Corporate Transparency Act [0] (at inserted subsection 5336(a)(11)(B)(xxi)) that this regulation is implementing; it's pretty much set in stone from FinCEN's perspective. The closest I could find to an initial rationale was in the statement given by Ron Wyden when he introduced a 2017 version of the bill to the Senate [1]:

> The bill is constructed to exempt many legitimate businesses, and the information requested is already provided by most companies in the normal course of business. Collecting beneficial ownership information at the time of incorporation relieves later compliance burdens for legitimate businesses, while at the same time prevents illegitimate businesses from operating in secrecy.

That is, the regulation should impact as few businesses as possible while still achieving its goals, so any company that fits into the mold of almost-certainly-not-a-secret-shell-company should be exempted if possible.

Regarding the "left-field fine", that's presumably why businesses have a 30-calendar-day period to report that they are no longer exempt. But obviously, that isn't going to help if the business is unaware of the reporting requirement. Perhaps the requirement on new businesses is expected to spread awareness before the requirement on existing businesses comes into effect.

[0] https://www.govinfo.gov/content/pkg/PLAW-116publ283/pdf/PLAW... (big PDF warning)

[1] https://www.congress.gov/115/crec/2017/08/02/CREC-2017-08-02...

[ddmitriev]

Thank you for providing the context.

To me, it's the 20 FTEs requirement that is the most unexpected. The small businesses that I or the people I know have worked at or have interacted with were generally in the 2-10 FTE range.

For what it's worth, I personally have nothing against the spirit of this regulation. Corporations and LLCs are legal structures provided by the government. The (federal) government not always knowing who the beneficial owners are is an implementation artifact. FinCEN should have access to this information; I just wish that they would talk to the states about it instead of threatening individual owners with penalties and jail for not reporting to them directly.

[rsynnott]

I suppose the theory is that if they exempted all businesses with paid employees and actual premises, someone might simply set up their shell company with an employee or two. 20 is probably too high a burden for all but the most dedicated crooks.

[throw__away7391]

> It's true that they are much less likely to be shell companies

I think this seems to be the clear answer though. Such a business is not trivially filed into existence.