Category: Business Owners

When it comes to completing Beneficial Ownership Information (BOI) reports for entities formed on or after January 1, 2024, a common oversight is the inclusion of the BOI company applicant. In this blog, we’ll delve into why reporting the company applicant is essential, how to ensure it’s not overlooked, and the role of legal and financial professionals in streamlining this task.

Understanding the Role of the BOI Company Applicant

Under the Corporate Transparency Act (CTA), a company applicant is an individual that is responsible for filing and managing the filings of the necessary documentation to establish a new business entity. 

This role can often be filled by a lawyer, accountant, or another professional advisor who assists in the formation process. Business owners may also be company applicants.

Why is the BOI Company Applicant Important?

1. Regulatory Compliance: Including the company applicant in the BOI report ensures full compliance with the Corporate Transparency Act (CTA). This act mandates that all entities disclose their beneficial owners and the individuals who aided in forming the company. Proper reporting helps avoid penalties and maintains transparency.
2. Accurate Representation: The company applicant’s inclusion may provide a complete picture of the entity after its formation. It identifies the person or entity who managed the creation process, which is important to the relevant regulatory authorities.
3. Accountability: The Financial Crimes Enforcement Network (FinCEN), the regulatory body collecting BOI reports, may want to collect the identity of the company applicants if any questions or issues arise regarding the business’s purpose of formation.

Common Oversights (and How to Avoid Them)

Despite the importance of reporting the company applicant, it’s a step that is easily overlooked. This oversight can lead to incomplete reports and potential non-compliance. Here’s how to ensure this step is not missed:

1. Standardized Processes: Implement a standardized procedure for new entity creation that includes a checklist for all required filings – including that under the CTA. Ensure that recording the individuals who may be company applicants is a step in your process.
2. Clear Communication: Legal and financial professionals should clearly communicate the need to include themselves as a company applicant when advising clients to file their BOI reports for their new entity. Make sure to ask your professional who from their organization needs to be on the report.
3. Double-Check Submissions: Before finalizing and submitting the BOI report, double-check that all required information, including the company applicant’s details, is included. Implementing a review process can help catch any missed details.

The Role of Professionals in Ensuring Accurate Reporting

Lawyers, accountants, and other professionals play a pivotal role in ensuring that all aspects of the business formation and compliance process are handled correctly. Here’s how they can assist:

1. Guidance and Reminders: Professionals should provide clients with clear guidance on their reporting obligations, including the need to include the company applicant. They can also remind clients of these requirements as part of their service.
2. Standard Procedures: Incorporate the requirement to report the company applicant into standard new entity creation procedures. This helps ensure that no steps are missed and that clients are aware of their responsibilities.
3. Regular Updates: Keep clients informed about any changes in reporting requirements or best practices. Regular updates help maintain compliance and reduce the risk of overlooking critical steps.

Accurate and complete reporting of the company applicant in Beneficial Ownership Information reports is crucial for regulatory compliance and transparency. By understanding the importance of this role and implementing measures to ensure it is not overlooked, businesses and professionals can maintain adherence to the Corporate Transparency Act and avoid potential issues.

To ensure you’re meeting all compliance requirements, consider consulting with a professional who can guide you through the process and help integrate these steps into your routine practices. Properly reporting the company applicant is not just a regulatory requirement—it’s a key element of maintaining transparent and accountable business operations.

In the evolving landscape of regulatory compliance, understanding the nuances of the Corporate Transparency Act (CTA) and its requirements is crucial for professionals involved in company formation – including the question of whether to report your CPA as a company applicant!

One key aspect that often raises questions is when a Certified Public Accountant (CPA) must be reported as a “company applicant.” While the role of a CPA is typically associated with financial management and tax planning, their involvement in the formation of entities can, in certain situations, make them subject to being reported under the CTA.

This blog will explore the specific circumstances under which a CPA must be reported as a company applicant, why this is important, and what professionals should keep in mind to ensure compliance.

What is a Company Applicant?

A company applicant, as defined by the CTA, is any individual who files a document to create a company or registers a company to do business in the United States. 

This definition typically includes lawyers who draft and submit formation documents. However, the scope of WHO may be considered a company applicant can extend beyond just legal professionals, particularly when other professionals, such as CPAs, play a significant role in the formation process.

When Must a CPA Be Reported as a Company Applicant?

A CPA may be considered a company applicant under the following scenarios:

1. Direct Involvement in Filing Formation Documents: If a CPA personally files the documents with the state or similar body that is required to form a company, they are acting as a company applicant. This direct involvement in the administrative process is the most straightforward scenario in which a CPA must be reported.
2. Providing Direction for Entity Formation: In some cases, a CPA might not physically file the documents themselves but instead provide significant guidance or direction to a lawyer, client, or third party on how to form an entity. This includes directing the overall process. When a CPA’s involvement goes beyond simple advice and steps into the realm of actively managing or directing the formation process, they may also need to be reported as a company applicant.

Why Is It Important To Report My CPA As a Company Applicant?

Failing to accurately report company applicants can have significant legal and regulatory consequences. Entities can submit up to 2 company applicants on their initial BOI report, so it will be important to evaluate the individuals who were most involved in the formation process. 

The CTA is designed to increase transparency and combat illicit activities such as money laundering, and as such, the reporting of company applicants is a critical part of this framework. Not reporting a CPA who meets the definition could lead to penalties for the entity as well as the CPA if they knew about their role in this reporting requirement.

Furthermore, transparency in reporting helps maintain the integrity of the business environment and ensures that all parties involved in the formation of an entity are accountable. 

When To Report A CPA As a Company Applicant

Let’s consider a few common scenarios where a CPA would need to be reported as a company applicant:

• Scenario 1: A CPA is hired by a client to form a limited liability company (LLC) and solely takes on the responsibility of preparing and submitting all necessary documents to the Secretary of State. In this case, the CPA is the only one involved in the formation and should be reported as the company applicant.
• Scenario 2: A client asks their CPA to coordinate with a lawyer to form a corporation. The CPA provides detailed instructions on the structure and oversees the process, even though the lawyer is the one who files the documents. Here, the CPA’s role of directing the filing of the documents would require them to be reported as a company applicant along with the lawyer who filed the documents.
• Scenario 3: Consider the scenario above, but instead of a lawyer filing the documents, the CPA provides detailed instruction to the client for them to file with the Secretary of State online. Again, the CPA’s role of directing the filing of the documents would require them to be reported as a company applicant. Since the client filed the formation documents, they would be the second company applicant.

Exceptions: When a CPA Does Not Need to Be Reported

While there are scenarios where a CPA must be reported, it’s equally important to understand when this is not required. For example, if a CPA provides general tax or financial advice without any direct involvement in the formation process, they would not be considered a company applicant. Additionally, CPAs who simply consult on the implications of forming an entity, without taking any administrative actions, do not fall under this reporting requirement.

Understanding the Role of CPAs in Entity Formation

As regulatory requirements become more complex, it’s vital for CPAs to understand when their role in entity formation crosses the line into being a company applicant. Accurate reporting under the CTA is not only a legal obligation but also a reflection of a CPA’s commitment to transparency and ethical practices. By being aware of the situations that necessitate reporting, CPAs can better serve their clients while ensuring compliance with federal regulations.

FinCEN Beneficial Ownership Reporting Requirements – The Basics

The Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI) reporting requirements represent a significant step towards increasing transparency and combating illicit activities in the financial system. With the implementation of the Corporate Transparency Act (CTA), millions of entities in the U.S. are now required to disclose their beneficial ownership information. This guide provides a detailed overview of what is included in a beneficial ownership report under FinCEN rules and how entities can ensure compliance.

What is Beneficial Ownership?

Beneficial ownership refers to individuals who ultimately own or control a company, even if the ownership or control is exercised indirectly through other entities or arrangements. Under FinCEN rules, a beneficial owner is any individual who meets one or more of the following criteria:

1. Ownership: Having direct or indirect ownership of or control over at least 25% of the entity’s ownership interests.
2. Control: Having substantial control over the entity, this can apply to executives, senior managers, or anybody with the power to decide on important matters for the business.

Key Requirements of BOI Reporting

Identification of Beneficial Owners

Entities must identify and report information about each beneficial owner, including:

1. full legal name
2. date of birth
3. residential address
4. a unique identifying number from an acceptable identification document (e.g., passport, driver’s license)
5. an image of the identification document

Reporting Timeline

By January 1, 2025, entities in existence before January 1, 2024, must submit their first BOI report. The entities formed during 2024 must report within 90 days of formation. After 2024, newly created entities are required to file within 30 days if creation. Not only does an initial report have to be filed, but all information must be kept up to date. Meaning, if any information previously reported changes, it must be reported within 30 days after the modification.

Entities Subject to Reporting

BOI reporting applies to the majority of entities, including corporations, limited liability companies, and other businesses that are created in the United States or registered to do business here. Nevertheless, large operating companies, highly regulated entities, and dormant entities are among the 23 categories of entities that are exempt from reporting.

Common Challenges in BOI Reporting

1. Identifying Beneficial Owners: When ownership is dispersed over several levels of an entity, it may be difficult to identify all beneficial owners. Not only are beneficial owners those with ownership interests, but they are also those with substantial control, regardless of their financial interests in the entity.
2. Data Accuracy and Verification: It can be challenging to ensure that the information presented is accurate and to confirm the identity of the beneficial owners. It is the reporting company’s responsibility to ensure that reported information is correct. Tracking down the required information from all beneficial owners may require follow up mechanisms, adding time to the compliance process.
3. Maintaining Compliance: Reporting may not end with the filing of the first BOI report. Information must stay up to date with FinCEN, which means that internal processes that foster prompt reporting must be considered as beneficial ownership shifts within an entity. Any changes to BOI (example: beneficial owner moving to a new address, company hiring a new CEO, etc.) must be reported within 30 days of the change.

How Secure Compliance Simplifies BOI Reporting

Secure Compliance offers robust solutions to streamline the BOI reporting process, providing entities with what they need to comply with FinCEN requirements efficiently and accurately.

Here’s how our tools can help:

• Automated Data Collection: SecureFILE and SecurePRO automate the collection of beneficial ownership information, reducing the manual effort required and minimizing the risk of errors.
• Simplified Reporting: With user-friendly interfaces and step-by-step guidance, our solutions make it easy to complete and submit BOI reports, even for business owners that aren’t thoroughly versed in the CTA.
• Ongoing Compliance Support: Secure Compliance provides ongoing support to help you stay up to date with any changes in reporting requirements and ensure continuous compliance.

We Are Your Partner in BOI Reporting

Understanding and complying with the FinCEN beneficial ownership reporting requirements is crucial for entities operating in the U.S. By identifying beneficial owners, maintaining accurate records, and staying informed about reporting deadlines, you can avoid penalties and contribute to a more transparent financial system. Secure Compliance is here to assist you every step of the way, offering reliable tools and expert support to simplify your compliance journey.

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Guide to BOI Reporting: Introduction

Navigating the complexities of the Corporate Transparency Act (CTA) can be daunting for business owners, especially those at the helm of small to medium-sized companies.

The CTA’s reporting requirements are designed to improve transparency and combat financial crimes by requiring certain businesses to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

This guide to BOI reporting will walk you through the steps necessary to comply with these requirements.

1. Determine If Your Company Needs to File a Report

The first step is straightforward: assess whether your business is subject to the CTA’s reporting requirements. If your company is an LLC, corporation, limited partnership, or similar entity created by filing a document with a secretary of state or a similar tribal body, then you are required to file a report. Most formal business structures will fall within this mandate.

2. Determine Your Due Date

The timeline for filing depends on when your entity was formed:

• Prior to January 1, 2024: Your company’s due date is January 1, 2025.
• Formed in 2024: Your company has 90 days from the filing of your formation documents.
• Created in 2025 or beyond: Your company must file within 30 days of formation.

Marking these deadlines on your calendar is recommended to ensure timely compliance.

3. Identify the Company’s Beneficial Owners

Identifying beneficial owners is a two-pronged task. Owners are individuals with at least a 25% “ownership interest” or those who have “substantial control” over the company. The latter may require a more nuanced approach, considering factors like senior officer status, authority over key decisions, or the power to appoint or remove significant positions. If in doubt about someone’s status, consulting with an expert can provide clarity.

4. Determine the Company Applicants

Only for entities formed on or after January 1, 2024, identifying the company applicants is necessary. These are individuals who filed the entities formation documents, whether they were directly filed or had a significant role in directing or overseeing the process. Scenarios can vary, from an attorney filing documents solo to a team effort involving paralegals or corporate service providers. If your entity was formed through less straightforward means, seeking expert advice is advisable.

5. Gather Required Information

Before filing, you’ll need to collect specific information about each beneficial owner and company applicant, including:

• First and last name
• Date of birth
• Residential address
• An identification number (from a driver’s license, state/local/tribal ID, or passport)
• An image of the reported ID

For those wary of handling sensitive data, encouraging individuals to obtain a FinCEN Identifier or employing secure collection services such as Secure Compliance can ease the process.

6. File the Initial Report

With all necessary information at hand, filing the initial report marks a significant step towards compliance. This process, while detailed, is made easier by careful preparation and organization in the preceding steps.

7. File Updated Reports as Needed

Changes to your company or its beneficial owners must be reported within 30 days. This includes updates to personal information, as well as structural changes that affect those who qualify as beneficial owners. Unlike company applicants, beneficial owners are required to keep their information current, a task simplified for those with a FinCEN Identifier.

Are You Prepared to File?

Complying with the CTA’s reporting requirements is a critical obligation for many business owners. By following the steps outlined in this guide, you can ensure your business meets these obligations efficiently and accurately. Remember, when in doubt, consulting with experts who specialize in regulatory compliance can provide valuable guidance and peace of mind.

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