Important decisions include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.

An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to  establish ownership.

There are five instances in which an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception. In those cases, the reporting company does not have to report that individual as a beneficial owner to FinCEN.

EXCEPTION #1 - MINOR CHILD

The individual is a minor child, as defined under the law of the State or Indian tribe in which the domestic reporting company is created or the foreign reporting company is first registered.

NOTE: This exception only applies if a parent or legal guardian’s information is reported in lieu of the minor child’s information. Also, when the minor child reaches the age of majority, as defined by the law of the State or Indian tribe in which the reporting company was created or first registered, the exception no longer applies. At that time, if the individual is a beneficial owner, the reporting company must file an updated BOI report providing the individual’s own information.

EXCEPTION #2 - NOMINEE, INTERMEDIARY, CUSTODIAN OR AGENT

An individual qualifies for this exception if the individual merely acts on behalf of an actual beneficial owner as the beneficial owner’s nominee, intermediary, custodian, OR agent.

Note: Individuals who perform ordinary advisory or other contractual services (such as tax professionals) likely qualify for this exception. In scenarios where this exception applies, the actual beneficial owner must still be reported.

EXCEPTION #3 - EMPLOYEE

An individual qualifies for this exception if ALL THREE of the following criteria apply:

• 1. The individual is an employee of the reporting company. In general, the term employee means that
  an individual is subject to the will and control of the employer in what and how to do work, and that the employer may discharge the individual from work.
• 2. The individual’s substantial control over, or  economic benefits from, the reporting company are derived solely from the employment status of the individual as an employee.
• 3. The individual is not a senior officer of the reporting company. If they are a senior officer, they must be reported.

EXCEPTION #4 - INHERITOR

An individual qualifies for this exception if the individual’s only interest in the reporting company is a future interest through a right of inheritance, such as through a will  providing a future interest in a company.

Note: Once the individual inherits the interest, this exception no longer applies, and the individual may qualify as a beneficial owner.

EXCEPTION #5 - CREDITOR

An individual qualifies for this exception if the individual is a creditor of the reporting company.

The term “creditor” means an individual who would meet the
definition of a beneficial owner of the reporting company solely through rights or interests for the payment of a predetermined sum of money, such as a debt incurred by the reporting company, or a loan covenant or other similar right associated with such right to receive payment that is intended to secure the right to receive payment or enhance the likelihood of repayment.

For example, an individual qualifies for the creditor exception if the individual is entitled to payment from the reporting company to satisfy a loan or debt, so long as this entitlement is the only ownership interest the individual has in the reporting company.