Mastering BOI Reporting: What Law Firms Need to Know

With the introduction of the Corporate Transparency Act (CTA), law firms are facing new and crucial responsibilities. Understanding how your firm fits into the status of Beneficial Ownership Information (BOI) reporting is essential to avoid potential penalties.

Many business owners are grappling with this new requirement and are searching for guidance and assistance in complying. Many will turn to a trusted source for this information, and for many, this will be their attorney.

As a law firm, you may also need to adapt to new regulations, which include recognizing your firm’s status as a domestic reporting company and understanding the role of lawyers in the reporting process. Furthermore, if you have assisted clients in the formation process of their business, this is a service they need a solution for.

This article will break down the key mandates and reporting requirements specific to law firms, ensuring you’re well-prepared to meet compliance standards. By the end, you’ll know how to effectively manage BOI reporting within your practice and potentially on your clients’ behalf.

Impact of the CTA on Law Firms

The Corporate Transparency Act (CTA) will have a significant impact on law firms. This impact may be felt in several ways which include:

• Law firms may be considered domestic reporting companies
• Lawyers, paralegals, or other staff members may be considered company applicants 
• Law firms may need to educate their clients about the CTA’s beneficial ownership information (BOI) reporting requirements to ensure they remain compliant.
• Law firms must be equipped to guide their clients on how to meet the CTA’s beneficial ownership reporting requirements effectively.

Now, let’s take a closer look at each of these for a full picture of the role of law firms in BOI reporting. 

Law Firms as Domestic Reporting Companies

Generally, if you are a law firm, you are considered a domestic reporting company if your firm is structured as a corporation, LLC, or a similar type of entity that was established by filing documents with a Secretary of State or a comparable office under state or tribal law. This means that you may be required to file a beneficial ownership information (BOI) report. 

Exemptions for Law Firms from BOI Reporting

There is no specific exemption for law firms under the beneficial ownership information (BOI) reporting requirements. However, there is an exemption for large operating companies. A large operating company is defined as an entity that meets the following criteria:

• Employment – It employs more than 20 full-time employees in the United States
• Physical presence – It has a physical office location which is located within the United States
• Financial Threshold – It filed a federal income tax or information return in the previous year having more than $5 million in gross receipts or sales

If your law firm does not meet the above-mentioned criteria, you will need to file with the BOI reporting requirements

Lawyers as Company Applicants

A lawyer can be considered a company applicant based on their involvement in filing the necessary documents to create or register another reporting company with the secretary of state or a similar office. 

• If you, as a lawyer, directly file the document that creates or registers another reporting company then you are considered a Company applicant
• If you are primarily responsible for directing or controlling the filing process then you may be considered a company applicant
• If multiple individuals are involved in the filing process, as a lawyer, you can be considered a company applicant for the reporting company if you have primary responsibility for the filing. 

Lawyers as Beneficial Owners

Generally, the beneficial owner is defined as an individual or entity who exercises substantial control over the reporting company or owns or controls 25% or more ownership interest in a reporting company either directly or indirectly.

However, when it comes to law firms, lawyers do not qualify as beneficial owners, but this may depend on the nature of their work.

• General Legal and Accounting Services – Lawyers who provide accounting or legal services are not considered beneficial owners. 
• Agents of the Reporting Company – A lawyer who is designated as an agent of the reporting company may qualify for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.
• Senior Officers -However, if you hold the position of general counsel within a reporting company, you are likely considered both a ‘senior officer’ and a beneficial owner of the company.

Deadlines and Penalties of BOI Reporting for Law Firms:

The deadline for submitting your BOI report is based on your company’s formation or establishment date.

• Formed or established before January 1, 2024 – Deadline to submit the report by January 1, 2025
• Formed or established on or after January 1, 2024 – Deadline to submit the report within 90 calendar days from the effective registration date
• Formed or established on or after January 1, 2025 – Deadline to submit the report within 30 calendar days from the effective registration date

In case of failure to submit your BOI report within the deadline, you will be imposed the potential penalties by the Financial Crimes Enforcement Network (FinCEN). 

• Civil penalties range up to $591 per day for non-compliance.
• Criminal penalties range from $10,000 or up to two years of imprisonment.

Streamlined BOI Reporting for Law Firms from TaxBandits

Filing your Beneficial Ownership Information (BOI) Report accurately and on time is crucial for compliance and avoiding potential penalties. Most importantly, using authorized and trusted e-filing software makes the reporting process much more secure and efficient.

TaxBandits streamlines your BOI reporting process with a wide range of solutions designed for efficiency. Our software offers a white-label solution, allowing you to customize the interface to reflect your firm’s branding, enhancing your professional image.

With BOIR API integration, you can seamlessly connect our software with your existing systems, ensuring smooth and automated data transfer. Additionally, we provide robust staff and client management features that help you organize and manage your reporting tasks effectively. This feature enhances productivity through clear communication, effective task management, and seamless data sharing within your teams.

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