Under the Corporate Transparency Act, reporting entities formed before January 1 of this year must file their beneficial ownership information reports with the Financial Crimes Enforcement Network (aka the FinCEN). As this deadline nears, I have heard that compliance rates are low for companies formed before January 1, 2024. I am also hearing complaints about the costs of compliance, which could be no surprise as the FinCEN predicted multibillion dollar costs when it adopted its BOI reporting regulations.

It seems to me that businesses that report will fall into two categories: do it yourselfers and those seeking the advice of counsel. Although the FinCEN has published a beneficial ownership reporting toolkit, I expect that many BOI reports filed by DIYs will be incorrect in one or more respects. The fact is that the burden of beneficial ownership reporting falls primarily on smaller entities because the FinCEN's regulations exempt SEC reporting companies and large operating companies, as defined. While the FinCEN has published a Small Entity Compliance Guide, it is 50 pages long. Many small businesses lack the time, resources and legal sophistication to digest the intricacies of beneficial ownership reporting. Some of these companies will utilize outside firms to file their reports but it the quality of these firms may be uneven.

Larger, non-exempt entities can hire lawyers to assist them. In my experience, however, these professionals do always agree given the vagueness of the FinCEN's regulations and the variability of business ownership structures. I expect that if 70 lawyers were provided with the same facts, they would not idependently produce identical BOI reports.*

So how much is this costing the U.S. economy? According to the FinCEN, the total five-year average of costs is $6,996,732,512 for initial BOI reports and $2,033,391,518 for updated BOI reports.

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* In the second and third centuries BCE, a group of 72 translators (six from each of the 12 tribes of Israel) translated the Hebrew Bible into Greek. Although the translators worked independently, they reportedly produced identical Greek texts. "Septuagint" is derived for the Latin word for seventy - septuaginta (LXX).