Navigating the Complexities of the Corporate Transparency Act: Why CPAs Should Outsource

BOI Reporting

Written By: Sean Semmler

On January 1, 2024, the new Beneficial Ownership Information (BOI) reporting requirements under the U.S. Corporate Transparency Act (CTA) came into effect, marking the start of a significant shift in corporate governance for small businesses These new BOI reporting obligations require an unprecedented level of disclosure from private companies, including personal information about their key stakeholders, senior officers, and directors, to the Financial Crimes Enforcement Network (FinCEN), the bureau of the U S Treasury Department tasked with combatting money laundering, terrorist financing, and other criminal activity.

Any non-exempt entity formed or registered to do business in the U S will now be considered a “reporting company,” required by federal law to adhere to these new reporting requirements. While there are 23 different categories of exemptions, many of these apply to entities that are already in heavily regulated industries, such as banks, credit unions, venture capital fund advisers, and pooled investment vehicles.

These new BOI reporting obligations require reporting companies to disclose specific personally identifiable information (PII) for each of their beneficial owners and company applicants, including their full name, date of birth, address, and a scanned image of a non-expired governmentissued ID A “beneficial owner” is any individual who directly or indirectly, (i) exercises substantial control over the reporting company, and/or (ii) owns or controls at least 25 percent of the ownership interests of the reporting company

A “company applicant” is (i) the individual who directly files the document that creates or first registers the reporting company in the U.S., and (ii) where more than one individual is involved in the filing, the individual who is primarily responsible for directing or controlling the filing

Reporting companies formed or registered prior to 2024 have until the end of this year to file their initial report, while reporting companies or registered this year must submit their initial report within 90 calendar days of formation or registration

Reporting companies formed or registered on or after 2025 will only have 30 calendar days from formation or registration to file their initial BOI report Notably, a BOI report is not a one-time filing, and reporting companies will be required to track and update their BOI for as long as they exist.

FinCEN estimates that 32 6 million entities will need to file an initial BOI report this year, with tens of millions more expected to become reporting companies by 2030. Despite the critical importance and broad scope of these new BOI reporting requirements, a majority of reporting companies are not even aware that these requirements exist. This lack of awareness is especially troubling given the severe civil and criminal penalties for noncompliance, including fines of up to $500 per day (adjusted for inflation), and up to two years in prison.

Why CPAs Should Exercise Caution

Given the complexity and ambiguity of these reporting requirements, CPAs should approach this issue with caution. While any authorized representative can submit a BOI report on behalf of a reporting company, advising on how best to interpret and comply with these requirements is a different matter. Legal associations across the country are currently debating whether providing guidance on these new BOI reporting requirements without a law degree constitutes the “unauthorized practice of law,” a term whose definition varies by jurisdiction

Although CPAs have a limited grant to interpret tax law under Title 26 of the U S Code, it remains uncertain whether the BOI reporting requirements fall within this scope. Insurance providers have already cautioned that interpreting the CTA likely falls outside of the scope of “professional services,” meaning that CPAs who advise their clients directly on these reporting requirements may be exposing themselves to immense risk.

The final BOI reporting requirements under the CTA (including comments) are complex and extensive, spanning hundreds of pages and encompassing numerous exemptions, definitions, and special rules. To complicate things further, FinCEN continues to issue additional guidance Advising clients on these reporting requirements may require interpreting a wide range of legal documents at the state, federal, and international levels to help determine beneficial ownership status. Additionally, CPAs should consider the significant risks associated with handling and storing the sensitive PII included in these reports.

Given these factors, CPAs and accounting firms should carefully consider whether they have the expertise and resources to manage BOI reporting in-house. In most cases, it will be necessary to refer clients to a service that specializes in the preparation and submission of BOI reports

Comply Simplified – The All-In-One BOI Reporting Solution

Comply Simplified, a partner of the MSATP, is the only all-in-one compliance platform dedicated to helping small businesses navigate the intricacies of these new BOI reporting requirements under the CTA While other services merely assist with the submission of already-completed reports, Comply Simplified offers expert guidance on how to accurately complete these BOI reports. Our platform is designed to help businesses understand the nuances of these new regulations and ensure that every detail is correctly reported

Trusted by top law firms, CPA associations, and accounting agencies, we’ve been vetted and approved by FinCEN to help companies make these filings directly from our platform For CPAs, partnering with Comply Simplified offers peace of mind By referring clients to our platform, you can mitigate the risks associated with BOI reporting while ensuring that your clients receive the expert guidance they need to comply with these new BOI reporting requirements under the CTA.

To see how Comply Simplified can benefit your firm and your clients, we invite you to request a demo You can contact us at support@complysimplified.com, or you can visit our site at https://www.complysimplified.com/ to learn more.