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The Corporate Transparency Act: A Game-Changer for Accounting and Law Practices.

As FinCEN rolls out its Beneficial Ownership Information reporting guidelines, well-positioned accounting firms are set for significant growth.

U.S. accounting firms should brace themselves for an unprecedented surge in filing requests from domestic reporting companies, with an estimated 33 million U.S. businesses mandated to navigate complex new report submissions to FinCEN. Firms that strategically position themselves stand to command rates surpassing $1,800 per hour while notably expanding their clientele.

Starting January 1st, 2024, nearly all U.S. enterprises are obligated to adhere to the Corporate Transparency Act (CTA) by submitting a Beneficial Ownership Information report (BOI report). This mandate isn’t one businesses can sidestep; failure to file or submitting erroneous information can result in steep FinCEN penalties, encompassing fines of $10,000 or incarceration of up to 2 years. Given the nature of Department of Treasury submissions, numerous U.S. companies will delegate this responsibility to their trusted accounting or legal partners to mitigate potential risks.

Projections indicate that between 40% to 55% of the 33 million reporting companies will seek expert assistance for compliance with the Corporate Transparency Act. This translates to approximately 18 million domestic reporting companies that are poised to spend between $400 to $800 with firms for report filing. This situation presents a golden opportunity for forward-thinking accounting firms: not only can they onboard a significant number of new clients needing guidance with this legislation, but they can also anticipate a boost in billings by a minimum of 10% per existing client, according to FinCEN’s forecasted report volume.

In 2024, beneficial ownership information reporting is set to generate a staggering $10 billion in revenues for the accounting and legal sectors. Given the intricate nature of these reports, firms should strategically equip themselves with BOI filing software tools to assist clients and harness new revenue streams.

Understanding the Corporate Transparency Act and the Essence of Beneficial Ownership Information Reporting.

The Corporate Transparency Act mandates that smaller-scale U.S. business submit Beneficial Ownership Information Reports to FinCEN from 2024 onwards. Each of these companies will be classified as a “reporting company” under FinCEN’s new regulations. These new reporting obligations fall under the umbrella of U.S. anti-money laundering measures, encapsulated within the National Defense Authorization Act.

A firm can only avoid the “reporting company” classification if it exceeds $5M in gross receipts AND employs 21 or more full-time individuals. While exemptions for stringently regulated sectors exist, they are infrequently applicable. FinCEN’s updated reports mandate that each reporting entity provide details about the business itself and any individual acting as a beneficial owner. This includes individuals with substantial control or ownership interests. The substantial control definition even applies to employees of the reporting company, that may not hold equity, but are able to make important decisions on behalf of the reporting company.

According to preliminary data from FinCEN, 33,206,418 established reporting companies are slated to submit their inaugural reports in 2024. Subsequent to that, an estimated 14,456,452 reports will be required annually, as any modifications within a reporting company necessitate an “updated report” to be filed with FinCEN within 30 days of any change to the reporting company information. Even minimal changes, such as an owner updating their residential address, will initiate the need for the reporting company to submit a fresh report, ensuring compliance and penalty avoidance.

Substantial filing volumes are poised to bolster well-prepared, full-service accounting firms in their adherence to the Corporate Transparency Act. Conversely, firms that are less prepared may find themselves disadvantaged, facing potential client attrition.

Given that a full-service accounting firm aims to function as a comprehensive hub for all financial matters, it’s imperative they are equipped for BOI reporting. This entails proactive planning regarding data collection and report submission.

Even smaller firms that focus on tax filing can begin generating year-round revenue by offering CTA compliance to their clients. Reporting companies may need to change their information at any point in the year. If they know their tax filer can file an updated BOI report, they will gladly reach out to keep their company in compliance and avoid penalties. Reporting companies only have 30 days to file an updated BOI report, which means they cannot wait until the following filing season to submit.

Positioning Your Accounting Firm for Success: Preparing for the Corporate Transparency Act.

To both advance and sustain their position within the accounting sector, firms must prioritize two critical components: awareness and operational efficiency.

Awareness entails firms initiating planning for content centered on the Corporate Transparency Act, spanning their website, service offerings, blogs, and marketing initiatives. Given FinCEN’s lag in apprising reporting companies of these novel filing mandates, reporting companies will urgently seek guidance in 2024, looking for competent firms to aid with submissions. It’s also prudent for firms to obtain listings on platforms such as FincenList.com, a complimentary service for verified entities, that facilitates directing business owners to accounting firms proficient in CTA filing services.

Operational planning necessitates firms to contemplate their approach to collecting beneficial ownership information from each reporting company, effective file management, and the e-filing of BOI reports into FinCEN’s beneficial ownership secure system. It compels firms to probe queries such as, “Considering our client base, what streamlined procedures must be in place to efficiently handle and monitor such a volume of reports?”

Given that every company is mandated to submit a beneficial ownership information report, accounting firms must gear up to handle submissions for their entire client roster and consider the staff hours needed for each reporting entity. Without a streamlined operational plan in place for CTA compliance, this influx in filings could potentially overshadow other essential services.

Efficient filing processes not only ensure current clients remain satisfied and compliant but also enables the firm to seize new compliance revenue opportunities. Additionally, it positions the firm to attract and win new clients from the vast pool of 33 million reporting companies.

For accounting firms with more than 50 clients, adopting CTA filing software becomes essential for clients to report beneficial ownership information.

FinCEN’s beneficial ownership reports involve gathering between 50 and 100 distinct data points from clients, facilitating document uploads for each beneficial owner or individual with substantial control, and navigating the numerous unique definitions crafted by FinCEN for this legislation. Given the substantial penalties tied to erroneous submissions, it’s paramount for clients to understand the report and provide accurate information.

Thankfully, tools like FincenFetch have been specifically designed for Beneficial Ownership Reporting, streamlining the filing process regardless of the volume of reports firms manage on their clients’ behalf. FincenFetch offers an intuitive user experience much like sharing a DocuSign link. By sending a “Fetch” link, firms grant clients access to a walkthrough to report beneficial ownership information. This interface continually saves user progress and incorporates robust security measures for uploading the necessary identification documents.

Once clients submit all required data, the software notifies the firm about the readiness of the client’s submission. The platform’s streamlined approach to the beneficial ownership reporting process enables even the firm’s less experienced members to efficiently review a substantial number of submissions. Additionally, it possesses the capability to e-file the reports directly into FinCEN’s beneficial ownership secure system.

All of these utilities are available from a dashboard, effectively serving as a CRM tailored for firms facilitating Corporate Transparency Act compliance. This consolidated view offers a comprehensive snapshot of all clients, allows firms to monitor progress, and dispatches reminders to clients lagging in their submissions.

Leveraging Software Becomes Essential When Handling Vast Volumes of Beneficial Ownership Information Reports.

For accounting firms with more than 50 clients, adopting CTA filing software becomes essential for clients to report beneficial ownership information.

FinCEN’s beneficial ownership reports involve gathering between 50 and 100 distinct data points from clients, facilitating document uploads for each beneficial owner or individual with substantial control, and navigating the numerous unique definitions crafted by FinCEN for this legislation. Given the substantial penalties tied to erroneous submissions, it’s paramount for clients to understand the report and provide accurate information.

Thankfully, tools like FincenFetch have been specifically designed for Beneficial Ownership Reporting, streamlining the filing process regardless of the volume of reports firms manage on their clients’ behalf. FincenFetch offers an intuitive user experience much like sharing a DocuSign link. By sending a “Fetch” link, firms grant clients access to a walkthrough to report beneficial ownership information. This interface continually saves user progress and incorporates robust security measures for uploading the necessary identification documents.

Once clients submit all required data, the software notifies the firm about the readiness of the client’s submission. The platform’s streamlined approach to the beneficial ownership reporting process enables even the firm’s less experienced members to efficiently review a substantial number of submissions. Additionally, it possesses the capability to e-file the reports directly into FinCEN’s beneficial ownership secure system.

All of these utilities are available from a dashboard, effectively serving as a CRM tailored for firms facilitating Corporate Transparency Act compliance. This consolidated view offers a comprehensive snapshot of all clients, allows firms to monitor progress, and dispatches reminders to clients lagging in their submissions.

Lacking dedicated software, firms would be forced to create PDF forms and resort to online systems for uploading files. Relying on PDF form-based data submission introduces an array of challenges:

  1. PDF Forms Can Deter Clients and Impact Firm Reputation: The extensive number of fields and intricate definitions can make traditional forms cumbersome for clients navigating this complex regulation. Unlike software that empowers clients to finalize a report in approximately 10 to 15 minutes, conventional forms will demand well over an hour, even for rudimentary reports with a limited number of beneficial owners. Adopting CTA compliance software provides a structured, guided experience, easing compliance for beneficial owners and demonstrating the firm’s commitment to valuing their time.
  2. Separate Platforms for Document Uploads are Inefficient: To finalize reports, a dedicated platform is essential for gathering identification documents submitted by each beneficial owner or individual exerting substantial control. These documents must accompany the primary forms used to accumulate the beneficial ownership details. It makes far more sense to use a comprehensive system, capable of seamlessly integrating document uploads and managing the entire BOI reporting workflow.
  3. The Imperative of a CTA Compliance File Management System: Given that an overwhelming majority of clients will be obligated to submit beneficial owner reports, establishing a robust filing management system is critical. This ensures that the firm remain coordinated, especially when grappling with an extensive volume of filings. Inadequate management of Beneficial Ownership Information reports can culminate in severe financial repercussions for each client’s reporting company and the associated beneficial owners.

Navigating the Corporate Transparency Act compliance presents an immense growth opportunity for firms. However, without the right software support, this potential boom can quickly devolve into disorder due to the anticipated surge in filing volumes. We strongly advise scheduling a demo with FincenFetch to explore how solutions like FincenFetch can adeptly equip your firm for FinCEN’s beneficial owner report submissions.

Determining Pricing for Corporate Transparency Act Compliance Services

Determining the appropriate fee revolves around what each reporting company is willing to invest in report preparation. Thankfully, both FinCEN and other industry stakeholders have conducted research and released data on this topic, drawing insights directly from prospective reporting companies.

In 2024, first-time report filings will generate a substantial revenue of $7.9 to $10.1 billion for both legal and accounting sectors, stemming solely from existing reporting entities submitting their initial reports. Subsequent to this introductory year, amended report submissions are projected to accrue a further $2.3 to $3.8 billion annually starting from 2025. These revenue projections are predicated on the assumption that each reporting entity will be charged between $400 to $800 for their initial report and between $200 to $400 for any subsequent updates to their beneficial owner information.

Given the anticipated pricing preferences of reporting companies, it’s crucial for firms to position these reports as fixed-price offerings, mirroring the approach used for tax returns, to remain competitive and appeal to a high volume of reporting companies.

Another approach firms might consider is integrating CTA compliance into their current suite of filing services. Clients generally prefer not to be billed on an hourly basis for these reports, reserving such billing structures only for intricate filing scenarios that demand a thorough examination of complex ownership stakes or intricate control stipulations.

Smart firms leverage software in combination with flat rate pricing to handle more reports in less time per report, while assessing ways to engage entry-level or junior staff to manage substantial report volumes and maintain accuracy. The pricing benchmarks set forth by FinCEN underscore the need for firms to have a streamlined system for gathering, overseeing, and submitting BOI reports in a manner that aligns profitably with their suite of services.

Leveraging compliance software enables firms to effectively charge close to $2,000 per hour for compliance filings, all while maintaining cost-effective rates for each client’s reporting entity. The two scenarios below illustrate a comparison between firms billing at a rate of $600 per report: one that operates without software, and another that employs software to facilitate the gathering and filing of beneficial ownership details:

  1. Without Compliance Software: The firm spends 15 minutes with the reporting company to explain the law and sends a PDF to the client along with a document collection link. The client dedicates 90 minutes to filling out the PDF form, and during this process, poses several questions to the firm which require 30 minutes of emails and phone calls for clarification. Subsequently, the firm spends another 45 minutes transferring the information into a file management system, followed by 30 minutes reviewing the file with the client via Zoom or a phone call. Lastly, inputting this information into the FinCEN filing system demands another 30 minutes of staff time. In total, for a straightforward report, the firm could easily expend three or more hours, resulting in billing rates of roughly $200 per hour.
  2. Using Compliance Software: The firm spends 15 minutes with the reporting company to explain the law and sends a FincenFetch “Fetch” link, which directs the client to an intuitive online process. Here, the client spends only 15 minutes submitting their data, with any questions promptly addressed by the platform’s guided experience. The firm can swiftly review the details within the same system, negating the need for reentry of data, and can then e-file directly. With this streamlined process, the firm’s total time expenditure drops to a mere 20 minutes per report. This efficiency allows for the completion of four or more filings within an hour, translating to potential revenues of $2,400 per hour. Even more, this system can be efficiently operated by junior staff, ensuring client satisfaction due to fewer report errors. This also increases the likelihood that clients will submit their information punctually, ensuring they remain compliant with the law.

Establishing a Timeline: Preparing for the Corporate Transparency Act Filings

Beneficial Ownership Information reporting commences on January 1st, 2024. It’s prudent for firms to initiate their preparations in the fourth quarter of 2023 to ensure smooth client compliance management.

For law firms specializing in company formations and business law, the urgency is heightened. New businesses established in 2024 have a mere 30-day window to submit their initial reports. Furthermore, these law firms must be identified on the report as company applicants. It’s imperative for attorneys to not only inform clients about this obligation but to also incorporate the firm’s specific FinCEN identifier number on each report. In this context, a company applicant refers to any external entity assisting in establishing a reporting company. However, these company applicants don’t retain ownership rights or exert substantial control over the reporting company post-establishment.

Thankfully, the heightened filing demands also signify substantial revenue opportunities for firms. Industry projections suggest that integrating CTA compliance could boost yearly billings by $600 per client in 2024, solely from initial reports. This is expected to be followed by an increase of $400 annually starting in 2025 due to updated reports. Given the volume of these filings, implementing a software solution becomes essential. Such a tool would not only enhance client satisfaction but also simplify compliance, minimize mistakes, and efficiently integrate this new filing service within the firm’s offerings.

CTA compliance software usually costs under 7% of the additional revenues derived from CTA compliance activities, marking it as an obvious pick for progressive firms. What’s more, the software proves exceptionally cost-effective, given its capacity to amplify hourly fees via a flat rate structure and increase report turnover by empowering clients to prompt updates whenever their reporting company data alters.

Interested in seeing how it works? Schedule a demo of FincenFetch and dive into CTA compliance software tailored for your firm.

Charles Wismer

Charles Wismer

Charles is a fund manager and finance industry specialist with ten years of experience managing complex corporate structures in finance and fintech. His expertise concentrates on deploying and scaling novel solutions for new technologies and regulations.

Charles Wismer

Charles Wismer

Charles is a fund manager and finance industry specialist with ten years of experience managing complex corporate structures in finance and fintech. His expertise concentrates on deploying and scaling novel solutions for new technologies and regulations.

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