Should I Report My CPA As a Company Applicant?

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.