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How Accounting Firms Can Help Clients with the CTA

Accounting Firms and CPAs Are Uniquely Positioned to Help with the CTA

Accounting firms and CPAs are in a unique position to assist their clients with the Corporate Transparency Act (CTA).  The CTA is going to require more than 32 million companies to file beneficial ownership information (BOI) reports during 2024.  Unfortunately, some articles on the topic have given some CPAs the impression that they are barred from assisting clients with their BOI reports.  This is unfortunate because of the tremendous value accounting firms can bring to the CTA compliance process.

How Accounting Firms Can Assist in Preparing BOI Reports

The CTA requires reporting companies that are not exempt to file a BOI report with FinCEN.  FinCEN is the Financial Crimes Enforcement Network of the U.S. Treasury.  Each BOI report must identify each beneficial owner of the reporting company.  Each BOI report must also provide five pieces of personally identifiable information (PII) regarding each beneficial owner.  In particular, the report must include for each beneficial owner, the individual’s (1) full legal name, (2) date of birth, (3) residential address, (4) a unique identifying number (which may be a driver’s license number or passport number), and (5) an image of the driver’s license or passport.

Accounting firms have data security protocols for managing confidential client data.  Accounting firms are also familiar with the complex company structures that can make BOI reporting difficult.  As a result, Accounting firms have a strong capability to advise clients through the BOI report preparation process.

Accountants and Concerns with the Unauthorized Practice of Law

Earlier in 2024, some articles appeared that cautioned Accounting firms and CPAs to exercise care when advising clients on the CTA.  These articles did not tell accountants that they could not discuss the CTA with clients.  Rather, the articles suggested that CPA firms should review their engagement letters to determine which activities would be in scope.  The articles advised CPA to screen clients to avoid potentially challenge representations.  The articles also described data security tools that would help accounting firms ensure that any PII they might acquire would be handled securely.  These are all helpful pieces of advice.  But none of these admonitions prevents a CPA firm from assisting clients with filing BOI reports.

Nearly all of the fifty states have a law that prohibits individuals who are not licensed from practicing law.  These laws are generally called “UPL” or “unauthorized practice of law” statutes.  They are inconsistent from state to state and are inconsistently enforced. 

By way of example, LegalZoom offers its corporation formation and related legal document services throughout the U.S., but has been sued by state bar organizations in only a handful of states.  In each of those instances, LegalZoom was able to settle the litigation in way that allowed it to carry on its business.  In addition, there are legitimate questions about the extent to which UPL laws truly benefit consumers, since the application of technology arguably improves the ability of consumers to access law-related services with greater efficiency.  See, e.g., Unauthorized Practice of Law Claims Against LegalZoom-Who Do These Lawsuits Protect, and is the Rule Outdated? (Georgetown Journal of Legal Ethics, 2020).

More recently, the AON insurance company, a significant provider of professional liability insurance to CPA firms, published an article to clarify its thinking.  AON’s article (Risk Management and the Corporate Transparency Act) provides a sample engagement letter for CPA firms who provide advice on the CTA.  Rather than warning its insureds that they should not provide CTA advice, AON’s approach is to encourage those firms to use an enhanced engagement letter.  If one of the largest professional liability insurers is promoting a sample engagement letter for the provision of CTA advice, that suggests that AON has concluded that the activity is not prohibited to CPA firms.

Accounting liability insurer CNA recently sent a letter to its 25,000 firms, reassuring them that their policies would cover them if those chose to provide CTA advisory services to clients. 

It might be easy to understand why a state legislature would prohibit an unlicensed individual from representing a client in court.  It is harder, however, to appreciate why licensed accountants should be prohibited from answering questions about the CTA.  The subject matter of the CTA is a subject matter on which accountants have expertise.  For those clients who cannot master the CTA on their own (or with the benefit of the free educational materials available on the Web), there are a limited number of professional advisors available.  Permitting accounts to assisting clients with their BOI reports, where educated resources are already scarce, should not harm the business of those lawyers who want to provide legal advice on the CTA.   

Why CPA Firms and Accountants Should Help Their Clients with BOI Reports Under the CTA

There are several reasons why CPA firms and accountants should help their clients prepare their BOI reports under the CTA.

  1. FinCEN Expects CPAs to Help with BOI Reports. FinCEN expects that CPA firms and accountants will be available to assist clients with preparing their BOI reports. In FinCEN’s FAQs on BOI reporting, FinCEN wrote that, while reporting companies are not required to have a lawyer or accountant assist them, FinCEN expects that “reporting companies that need help meeting their reporting obligations can consult with professional service providers such as lawyers or accountants.”
  2. Accountants Have the Right Skills to Assist with BOI Reports. State UPL prosecutions often focus on those tasks for which a licensed attorney is uniquely qualified, such as representing a client in court.  The CTA is a new law that requires reporting companies to determine the identities of their beneficial owners.  The task of understanding the CTA’s requirements and explaining those requirements to a client is similar to the service performed by accountants all the time when they explain tax and accounting requirements to clients. 
  3. Accounting Firms Have Secure Data Protocols to Handle BOI Information. A key concern relating to BOI reports is the procedure followed to collect the PII required from each beneficial owner.  In this regard accounting firms are better situated than many law firms.  Many law firms have document storage systems that function like libraries, allowing every member of the firm to access every document.  Ensuring the security of BOI PII is important to guard against identity theft.  Most accounting firms – because of their role in preparing tax returns – already have protocols to segregate PII from other documents for data security.  In this way, many accounting firm are better situated than many law firms to help clients collect the required PII from beneficial owners.
  4. The CTA Contains Concepts Familiar to Accountants. The CTA defines “beneficial owner” as any individual who owns 25% or more of the ownership interest in the reporting company or who exercises substantial control.  Accountants are familiar with the concepts of beneficial ownership and substantial control.  Consequently, an accountant who is involved in preparing a reporting companies statement of beneficial ownership (Form K-1) will be uniquely suited to help that company calculate beneficial owners based on the percentage ownership test.
  5. Accountants Are Adept at Compliance Procedures. The advent of the Sarbanes-Oxley Act (which requires public companies to adopt internal controls over the preparation of financial statements) and SOC-II requirements (where auditors review a company’s data security and confidentiality procedures) have opened a door for accountants to provide compliance-related advice.  From this point of view, CTA compliance is just another compliance exercise.  Accountants can assist clients in implementing procedures for data collection, analysis and reporting that align with the requirements of the CTA.
  6. Accountants Can Mitigate Risk Through Engagement Letters. As the AON article suggests, accounting firms that want to mitigate their risk can do so through an appropriate engagement letter. 

Summary of Why Accountants Should Help Their Clients Prepare BOI Reports Under the CTA

Accounting firms and CPAs have skills that bear on the topics involved in the CTA and it would help the marketplace if they could use those skills to help their clients.  It will be challenging for more than 32 million companies to file their initial BOI reports before the end of 2024.  While some reporting companies will be able to educate themselves, many will need some help.  Accounting firms and CPAs have the proper training and skills to explain the CTA to clients and to assist them with filing their BOI reports.  While it will be prudent for firms to review and upgrade their engagement letters to mitigate risk, concerns with UPL should not frighten away those firms and accountants who can add value to their clients through the compliance exercise.

The online filing services offered by FinCEN Report Company can help business owners and their professional advisors.  The FinCEN Report system segregates confidential personal information, so that individuals cannot access each other’s personal data.  The system allows professional advisors to see how the reporting company is designating beneficial owners.  Where helpful, those advisors are thereby empowered to provide advise on those designations.  When the reporting company has completed the process, and each beneficial owner has input their personal data into the system, the reporting company itself can file its BOI report online.  For more information, or to request a demonstration, please visit