On 9/18/23, FinCEN published the Small Entity Compliance Guide for beneficial ownership information (BOI) reporting under the Corporate Transparency Act (CTA) and simultaneously updated the FAQs regarding CTA compliance under FinCEN’s BOI FAQs. Professional Service Providers such as accountants or lawyers can potentially have reporting requirements under the CTA even if they are not beneficial owners in their personal capacity.
The FAQs provide new information regarding potential reporting requirements for accountants and lawyers as follows:
Is my accountant or lawyer considered a beneficial owner? FAQ D.6. Here are the answers:
- Accountants and lawyers generally do not qualify as beneficial owners, but that may depend on the work being performed.
- Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners because ordinary, arms-length advisory or other third-party professional services to a reporting company are not considered to be “substantial control”.
- A lawyer or accountant who is designated as an agent of the reporting company may quality for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.
- An individual who holds the position of general counsel in a reporting company is a “senior officer” of that company and is therefore a beneficial owner. FinCEN’s Small Entity Compliance Guide includes a checklist to help determine whether an individual qualifies for an exception to the beneficial owner definition.
Is my accountant or lawyer considered a company applicant? FAQ E.3. Here are the answers:
- An accountant or lawyer could be a company applicant, depending on their role in filing the document that creates or registers a reporting company. In many cases, company applicants may work for a business formation service or law firm.
- An accountant or lawyer may be a company applicant if they directly filed the document that created or registered the reporting company.
- If more than one person is involved in the filing of the creation or registration document, an accountant or lawyer may be a company applicant if they are primarily responsible for directing or controlling the filing. For example, an attorney at a law firm that offers business formation services may be primarily responsible for overseeing preparation and filing of a reporting company’s incorporation documents.
- A paralegal at the law firm may directly file the incorporation documents at the attorney’s request. Under those circumstances, the attorney and the paralegal are both company applicants for the reporting company.
FinCEN’s Small Entity Compliance Guide outlays the Penalties
- The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.
- Senior officers of an entity that fail to file a required BOI report may be held accountable for that failure. Providing false or fraudulent beneficial ownership information could include providing false identifying information about an individual identified in a BOI report, such as by providing a copy of a fraudulent identifying document.
- A person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.
- An individual who qualifies as a beneficial owner or a company applicant might refuse to provide information, knowing that a company would not be able to provide complete beneficial ownership information to FinCEN without it. An individual might provide false information to a company, knowing that information is meant to be reported to FinCEN.
Is your Accountant or Lawyer familiar with the reporting requirements of the CTA?
