Roughly 80% of accounting firms doing business in the U.S. must comply with these new reporting requirements, according to recent AICPA estimates.
Beginning January 1st, 2024, tens of millions of small businesses must comply with the Corporate Transparency Act (CTA) by filing a Beneficial Ownership Information report (BOI).
Failure to accurately and timely file will result in significant FinCEN (U.S. Department of Treasury’s Financial Crimes Enforcement Network) penalties, including $10,000 in civil fines and/or up to two years in prison.
FinCEN’s new reports require each small business – which they refer to as “reporting companies” – disclose information about the reporting company and any individual who acts as a beneficial owner, including any individuals with substantial control or unique ownership interests.
Some firms will be exempt from BOI reporting
Not all accounting firms will be required to file a BOI report. 23 exemptions to the beneficial ownership information reporting requirement were specifically listed out in the CTA. Large firms, and public accounting firms registered with the PCAOB will be exempt from the CTA’s Beneficial Ownership Information reporting rules.
Public accounting firms registered with the PCAOB. One of those exemptions is for “any public accounting firm registered in accordance with Sec. 102 of the Sarbanes-Oxley Act of 2002 (Act).” The Act requires public accounting firms to register with the Public Company Accounting Oversight Board (PCAOB) to prepare or issue an audit report for a U.S. public company or a broker-dealer, or to play a substantial role in those audits. The legislative rationale for the PCAOB-registered-firm exemption is that firms that provide assurance and audit services are obligated to report similar data as that required by the CTA.
Currently, there are more than 1,605 public accounting firms registered with the PCAOB, including U.S. firms and non-U.S. firms.
Large entities. The CTA also exempts any entity that exceeds $5M in gross receipts and has 21 or more full-time employees (FTEs) from needing to comply with the CTA’s BOI reporting requirement. Unfortunately, it’s difficult to find information based on gross receipts, with studies such as the IPA Top 500 Firms ranking firms based on net revenue. Any accounting firm that falls under the general gross receipts and FTE entity thresholds will need to file a Beneficial Ownership Information report (BOI) starting January 1, 2024.
Next steps for accounting firms to prepare for the Corporate Transparency Act and Beneficial Ownership Information filing requirements
As the Corporate Transparency Act’s effective date nears, there are a few steps that accounting firms can take to proactively prepare:
Start becoming familiar with the CTA and its requirements and educate your staffs. Currently there is a widespread lack of knowledge among most accounting firms of what the CTA requires, and how they should plan to meet those requirements for their own firms.
Gather necessary information. Develop a process or use commercial software to gather the necessary information and handling of beneficial ownership information in your firms, in a confidential and secure manner to file the required reports.
There are currently more than 46,000 public accounting firms doing business in the U.S., according to the AICPA. Even discount those accounting firms who qualify for one of the exemptions laid out in the Corporate Transparency Act (CTA), tens of thousands of firms doing business in the U.S., including most small firms, will be subject to Beneficial Ownership Information (BOI) reporting beginning January 1, 2024.