Empowering Business Owners and Redefining the Accounting Industry with Heart and Expertise Go Figure Accounting, led by Rachel Siegel, has been awarded the prestigious 2024 Profit First Professionals Firm of the Year. This recognition highlights Rachel’s commitment to both financial excellence and her clients’ success, making waves in the accounting industry by transforming businesses, one […]

Empowering Business Owners and Redefining the Accounting Industry with Heart and Expertise

Go Figure Accounting, led by Rachel Siegel, has been awarded the prestigious 2024 Profit First Professionals Firm of the Year. This recognition highlights Rachel’s commitment to both financial excellence and her clients’ success, making waves in the accounting industry by transforming businesses, one balanced ledger at a time.

“Rachel Siegel and Go Figure Accounting are the embodiment of Profit First at its best,” said Mike Michalowicz, author of Profit First and founder of Profit First Professionals. “Rachel’s dedication transforms her clients’ confidence, resilience, and long-term success. She doesn’t just use Profit First; she lives it, changing lives and businesses alike. That’s why Go Figure is our 2024 Firm of the Year.”

Go Figure Accounting’s award is a testament to Rachel Siegel’s holistic approach to business and finance. Whether advising clients or guiding her team, Rachel’s mission is clear: to ensure every individual and business she works with feels supported, empowered, and ready to tackle their next challenge.

Rachel isn’t just a numbers person—she’s a people person, too. With over 25 years of experience in both private and public accounting and a degree from Simmons College, Rachel has become an expert in financial consulting, especially for service-based industries like real estate, medical, and legal sectors. As one of fewer than 100 Profit First Mastery Certified accountants in the United States, Rachel’s firm brings a unique, personalized approach to accounting.

Under her leadership, Go Figure Accounting has thrived as a Profit First Mastery Certified firm, delivering customized, cash flow-focused strategies to clients across the country. Rachel is also the author of Profit First for Optometrists and the upcoming Profit First for Cybersecurity and Profit First for Managed Service Providers (MSPs), further cementing her reputation as a thought leader in financial strategy.

But Rachel’s success isn’t limited to spreadsheets and balance sheets. She believes in the power of balance—in business and in life. “Empowering people, not just their profits,” is her guiding principle, and she leads by example. When she’s not advising clients or developing cash flow systems, Rachel can be found cheering on her favorite sports teams, exploring new destinations, and spending quality time with her family.

Her dedication extends beyond client relationships. Rachel is committed to fostering confidence and growth in her almost all-female team, encouraging personal and professional development. Through office hours, mentorship programs, and leadership workshops, Rachel has created a culture at Go Figure where women in accounting, CPAs, and entrepreneurs are all empowered to excel.

How can I make my business more profitable? “That’s the million-dollar question, right?” Rachel Siegel says with a smile. As the owner of Go Figure Accounting and author of Profit First for Optometrists and the upcoming Profit First for Cybersecurity, she’s no stranger to helping businesses maximize profitability in complex industries. Profit First for MSPs and Cybersecurity CompaniesRachel explains […]

How can I make my business more profitable?

“That’s the million-dollar question, right?” Rachel Siegel says with a smile. As the owner of Go Figure Accounting and author of Profit First for Optometrists and the upcoming Profit First for Cybersecurity, she’s no stranger to helping businesses maximize profitability in complex industries.

Profit First for MSPs and Cybersecurity Companies
Rachel explains that many service-based businesses, including MSPs and cybersecurity firms, operate under the traditional formula: Sales – Expenses = Profit. In this setup, profit becomes whatever is left over after paying expenses. “The issue with this approach is that profit is treated like an afterthought, and for businesses that need to manage recurring contracts, technology upgrades, or security solutions, waiting for profit to materialize isn’t sustainable,” she notes.

Instead, Rachel advocates Profit First, a methodology the prioritizes profit from the outset: Sales – Profit = Expenses. In this scenario, businesses are forced to be more intentional with their spending.

Why This Matters for MSPs and Cybersecurity Firms
For MSPs and cybersecurity professionals, managing recurring costs like software licensing, infrastructure updates, and staff training can be financially draining. With profit often falling to the bottom of the list, it’s easy to lose track of long-term financial goals. Rachel explains, “Profit First ensures that profit isn’t an afterthought—it’s baked into your financial planning from day one.”

How Profit First Can Help You Scale
Rachel emphasizes that this approach is especially valuable in industries where monthly recurring revenue (MRR) is a key growth driver. “By allocating revenue to specific accounts for profit, taxes, and operating expenses as soon as it hits your account, you ensure that profit is secured first, and you never find yourself short on cash when tax season rolls around or when you need to invest in infrastructure,” she says.

MSPs and cybersecurity firms often operate on thin margins, making it critical to allocate funds wisely. The Profit First system encourages setting up separate bank accounts for profit, taxes, operating expenses, and owner’s pay. “Every time revenue comes in, you allocate a percentage to each account based on your targets. This guarantees profit rather than hoping for it at the end of the quarter,” Rachel explains.

Imposing Financial Discipline on Operating Costs
Rachel adds that for MSPs and cybersecurity firms, which often face fluctuating expenses—such as unexpected equipment failures, client demands, or rapid tech advancements—the Profit First method is a game-changer. “By limiting the amount available for operating expenses, you’re naturally encouraged to scrutinize every purchase. This curbs overspending, especially in areas like software subscriptions, training, equipment, and marketing, all while ensuring your profit margins remain intact,” she says.

This discipline is particularly important in industries where it’s easy to justify high costs for technology or staffing, often leading to cash flow issues. With Profit First, you maintain a steady, predictable flow of revenue to cover essential costs without sacrificing your profitability.

Building a Resilient Business
One of the greatest benefits of Profit First for cybersecurity firms and MSPs is the ability to build a stronger, more resilient business model. “When profit is guaranteed, you have a safety net in place. This allows you to weather tough economic conditions, invest in better tools, and even expand your service offerings without fear of running out of cash,” Rachel says.

For service providers, especially in the high-demand and high-risk cybersecurity sector, having the cash flow to invest in new technologies and certifications is crucial for staying competitive. “By using Profit First, you’re not just creating a more profitable business—you’re creating a more resilient one that can innovate and scale over time,” Rachel concludes.

By integrating Profit First into their operations, MSPs and cybersecurity professionals can transform how they handle finances, making profit a non-negotiable part of their business model while maintaining the flexibility to grow and adapt in a rapidly changing industry.

Running a small business is a bit like juggling – there’s always something to keep in the air, and it only takes one misstep for everything to come crashing down. While the thrill of delivering quality products, expanding your brand, and making customers happy can be exhilarating, one simple truth stands out: cash is king.  […]

Running a small business is a bit like juggling – there’s always something to keep in the air, and it only takes one misstep for everything to come crashing down. While the thrill of delivering quality products, expanding your brand, and making customers happy can be exhilarating, one simple truth stands out: cash is king. 

Understanding how money moves in and out of your business is crucial to keeping everything running smoothly. Yet, cash flow issues are among the most common headaches for small business owners. In fact, according to the SMBA, over one-third of small businesses cited “lack of capital” as the primary reason they had to close. That’s why it’s so important to plan ahead and ensure that your business always has the funds it needs.

Proper cash flow management involves anticipating both the money coming in and the money going out. To do this effectively, you need to know your current financial situation inside and out, including your payment processes and debts. Additionally, having a plan for handling any unexpected disruptions is key to avoiding potential cash flow crises.

Fortunately, most cash flow issues stem from a few common causes. By understanding these, you’ll be better equipped to prevent them or at least manage them more effectively when they arise.

Creating a Budget

Budgeting is essential for gaining control over your business expenses. However, in 2021, more than half of small businesses didn’t have a formally documented budget. If you’re looking to create one, start by setting specific and realistic financial goals. Overestimating your expenses – assuming you’ll pay more this year than last – can give you a buffer and help you avoid surprises.

While some may see budgeting as restrictive, having a budget actually provides a financial focus. It also gives you a benchmark to measure against when making spending decisions throughout the year. Remember, a budget is a living document, not set in stone. As your business grows or as external factors like inflation change the cost of goods, revisit and adjust your budget accordingly.

Building an Emergency Fund

Just like in personal finance, businesses need to be prepared for the unexpected. Unfortunately, many small businesses aren’t as prepared as they should be. Surveys show that 17% of business owners would have to close if they experienced two months of declining revenue. Additionally, 25% of businesses don’t reopen after a disaster.

Having an emergency fund can make a huge difference. This fund can help cover unexpected expenses, such as a surprise tax bill, a sudden increase in supply costs, or repairs after a disaster. To start building your emergency fund, first determine how much you need to cover your immediate expenses for one month. Then, decide how many months’ worth of expenses you want to save. Even if you can only set aside a small amount each month, it’s important to start. Set up an automatic transfer so you never forget, and make sure the money goes into an account designated solely for emergencies.

Managing Late Customer Payments

Customers are the heart of any small business, but when they make late payments, it can cause serious cash flow problems. Unfortunately, late payments are all too common, with 87% of businesses reporting that they typically get paid after their invoice due date. 

To help avoid this issue, consider making a few small changes. Send invoices promptly, offer multiple payment options, and be clear about payment terms and expectations upfront and on every invoice. You might also want to ask for a deposit or full payment before starting work, and consider charging a late fee to encourage timely payments.

Planning for Growth

Growth is generally good news for a small business, but if it happens too quickly or without a plan, it can strain your finances. Many business owners plan to expand their current location, service, or website, or even open additional locations. But growth often comes with increased costs – more employees, better equipment, larger office space, or higher shipping expenses.

To prepare for growth, create a plan for the expenses that will come with it. This might involve securing financing through a bank, applying for a small business loan, or using a business credit card for smaller purchases. Each option has its own pros and cons, so it’s important to research and plan ahead.

Paying Yourself a Salary

When cash is tight, it’s tempting to skip paying yourself to keep more money in the business. In fact, 26% of small business owners don’t pay themselves a salary. However, this can lead to more stress and distraction, negatively impacting both you and your business. Moreover, not paying yourself can cause issues come tax time.

Instead of going without, research what a fair salary for your role should be. Consultants, industry trade groups, and entrepreneurs in your field can provide guidance. One survey found that 46% of founders pay themselves less than $100,000 annually, but the key is to find a balance that reflects your business’s financial health and your personal needs.

Cash flow problems are a significant source of stress for small businesses, but they’re not inevitable. By understanding the common causes and taking proactive steps, you can keep your cash flow steady and focus on what really matters – growing your business.

As a small business owner, it’s easy to get caught up in the day-to-day grind. From managing customer requests to handling inventory, there’s always something demanding your attention. But while it’s important to keep things running smoothly, focusing too much on the daily tasks can cause you to lose sight of the bigger picture. That’s […]

As a small business owner, it’s easy to get caught up in the day-to-day grind. From managing customer requests to handling inventory, there’s always something demanding your attention. But while it’s important to keep things running smoothly, focusing too much on the daily tasks can cause you to lose sight of the bigger picture. That’s why it’s essential to spend time working on your business, not just in it.

What Does It Mean to Work On Your Business?

We know you’ve heard that saying before, but what does that mean exactly? It means investing time and energy into building a business model and strategy, not just completing day-to-day tasks. After all, a successful enterprise needs both short-term goals (hitting sales targets) and long-term objectives (developing new products/services or exploring new markets).

But, this is particularly challenging for small business owners to accommodate. Without sprawling administrative teams, these leaders often have no choice but to put out fires and focus on the immediate rather than the important. With limited resources, escaping the day-to-day tasks and taking a more strategic view can be almost impossible: there is often no one else to take on the immediate tasks.

According to Rachel Siegel, founder of Go Figure Accounting, working in your business means handling the immediate tasks that keep your business afloat—processing orders, responding to emails, dealing with customer service issues, etc. These tasks are crucial, but they’re also reactive. You’re putting out fires as they arise rather than planning how to avoid them in the first place.

“You need to have systems in place that will allow you to step away from the day-to-day details and focus on the long-term,” she says. “This could involve delegating tasks to other staff members, outsourcing whenever possible, or utilizing software solutions that automate low-level tasks.”

Indeed, working on your business is about taking a step back to look at the broader picture. It involves strategic planning, setting long-term goals, and thinking about how to grow and improve your business.

This might include tasks like:

Developing a marketing strategy: Instead of just running ads as needed, take time to think about your brand, your target audience, and how to reach them effectively.

Streamlining processes: Look for ways to make your business more efficient. Are there tasks that could be automated? Are there better tools you could use?

Building your team: Consider your staffing needs not just for today, but for the future. What roles will you need to fill as your business grows? How can you develop your current employees’ skills to meet those needs?

Financial planning: Rather than just keeping track of your expenses and income, work on a financial plan that helps you understand where you want to be in five years—and how you’re going to get there.

Why It Matters

When you’re only working in your business, you’re stuck in a cycle of reaction. This can make it hard to see opportunities for growth or to pivot when the market changes. Working on your business helps you break free from that cycle. It allows you to be proactive, to plan for the future, and to build a business that isn’t just surviving, but thriving.

How to Get Started

Start by setting aside time each week to focus on strategic tasks. Even an hour or two can make a big difference. Use this time to assess where your business stands, identify areas for improvement, and set goals for the future. It might feel strange at first to step away from the daily hustle, but in the long run, this is the kind of work that will take your business to the next level.

Remember, your business should work for you, not the other way around. By investing time in working on your business, you’re setting yourself up for success and creating a foundation for sustainable growth.

Sometimes the most important business ideas are the simplest. Focus on leads, not sales. Don’t sell products, provide solutions. Start small, build big. As for profitability, you can sum up why that matters in just one word: Stability.  Being profitable means your company can continue to offer its valuable services, even during challenging times. Being […]

Sometimes the most important business ideas are the simplest. Focus on leads, not sales. Don’t sell products, provide solutions. Start small, build big. As for profitability, you can sum up why that matters in just one word: Stability. 

Being profitable means your company can continue to offer its valuable services, even during challenging times. Being profitable means that you, your family, and your employees can maintain their lifestyle, come what may. 

“I love Profit First. I love it so much I wrote two books about it, Profit First for Optometrists and the upcoming Profit First for Cybersecurity,” says Rachel Siegel, CPA and owner of Go Figure Accounting. “I’m confident it can help all small businesses improve the overall health of their company. And be profitable. Because let’s be honest: in business we want to be profitable.” 

What Is Profit First?

Essentially, Profit First is a book about cash management, but in reality it’s so much more. Authored by Mike Michalowicz, it describes both a philosophy and a system for building businesses in a sustainable way that creates long-term success.

How do we do that? By flipping a universal rule on its head. 

The GAAP or Generally Accepted Accounting Principle is Sales – Expenses = Profit. In the formula, profit is a leftover, a final consideration, something that is hopefully a nice surprise at the end of the year. 

Profit First is mathematically the same, but it employs a shift in behavior: Sales – Profit = Expenses. With Profit First, every single time revenue comes into your company, you set aside a predetermined percentage of that revenue as profit. You transfer that profit to an account in a different bank, and you watch it accumulate.

Once you realize that your profit should be allocated before distributing money to rent, utilities, overhead, and other bills, the rest is easy. 

It’s basically the envelope method for personal finance, applied to business. Profit First is designed to provide clarity around your cashflow, allowing you to make informed decisions rather than emotional reactions or inaction.

Mindset Reset

We think of expenses as unavoidable—cost of material, for example. Rent, salaries, utilities, and so on seem equally intractable, at least in the short run. If we didn’t need to spend on something, we wouldn’t, right?

Not really. In fact, as humans we naturally focus on things that come first, and when profit is at the end of the equation, we seek to increase it by increasing the front—the revenue.

Reducing expenditure is something that simply doesn’t happen, and it may not seem feasible in growing business. The practice of setting aside a percentage of profit and spending only what remains is what makes the concept work. Expenses actually can be avoided, eliminated, or budgeted for a later date. Doing that can be uncomfortable, of course. It may mean some spending for equipment or expansion doesn’t happen immediately. Sometimes, difficult decisions about people and positions must be made.

Despite those hurdles, and the current bigger-faster-now culture, the profit-first approach is actually growth-friendly. When you come across a unique opportunity that will add to revenue and profits to your business, you will have the resources to invest without endangering the current business.

Benefits for Your Business

Rachel explains it this way: “If your company isn’t where you would like it to be and cash is not readily available, it is because you are not managing cash well. Small steps will get you to that goal. And that’s how Profit First works—with small steps.” 

Most of the clients who come to Go Figure typically have one, maybe two bank accounts for all of their finances. According to Rachel, when you’re looking at one large lump sum in your bank account, you’re much more likely to spend freely because everything feels like a small sum of the whole account. But if you separate all of your income to pre-determined allocations based on percentages, you force yourself to think more critically about your spending!  

The book recommends setting up five foundation accounts to start, but depending on your particular business it may be more.  If that seems overwhelming, Rachell says you can always start with two. 

Make a savings account in your existing bank and then allocate 1% of your income to that account, the profit account. The logic here is if you bring $1,000 of income this week, you can certainly run your business off $990. Ten dollars seems arbitrary, right?

Then we move to two or three percent. You can run your business on $980 or $970. If you do that for a few months, and grow your profit account, the pain point feels nonexistent and yet you have an entire account that’s just profit. And suddenly, Profit First seems completely logical and you’re ready for more foundation accounts, a.k.a. envelopes. 

What are the five foundational accounts? Income, Profit, Owner’s Pay, Tax and Operating Expenses. If your business carries significant debt, Rachel often recommends adding a sixth debt paydown account. 

Your exact percentages will depend on your business structure, type of business, and current financial situation, but let’s use this example: 

30% Owner’s Pay

10% Debt 

35% Expenses

15% Tax

10% Profit

Twice a month, the money coming in is divided by the percentages you have calculated and allocated to its applicable account to be used only for its specific purpose. 

“We have hundreds of success stories at every level,” says Rachel. “Profit First can make a huge impact whether you’re a solopreneur, a small family-owned business, or a giant corporation. By prioritizing profit and implementing a clear, disciplined system, business owners can achieve financial stability and growth. It’s a game-changer for those looking to build a sustainable, profitable business.”

Want to learn more about Profit First and how it could work for your business? Contact us today at gofigureaccounting.net/profit-first.

As an accounting professional, one of the most common concerns we hear from clients is the fear of a tax audit. While audits are relatively rare, they can be time-consuming and stressful, so ensuring your business is audit-proof can save you time, money, and stress.  Here are ten essential ways to keep your records clean […]

As an accounting professional, one of the most common concerns we hear from clients is the fear of a tax audit. While audits are relatively rare, they can be time-consuming and stressful, so ensuring your business is audit-proof can save you time, money, and stress. 

Here are ten essential ways to keep your records clean and compliant:

Accurate and Honest Reporting. The foundation of audit prevention is accurate and honest reporting. Maintain detailed and organized financial records, including receipts, invoices, and bank statements. Monitor your cash flow. And perform regular bank reconciliations to ensure your records match your bank statements. This helps catch errors early and keeps your books accurate.

Document Everything. Maintain detailed records of your income, business expenses, and deductions. This includes receipts, invoices, bank statements, and any other relevant documentation. It also includes contracts, agreements, and any relevant correspondence. Having thorough records not only helps you in case of an audit but also ensures you’re claiming all legitimate deductions.

Automate and Organize. Once upon a time, professionals kept all their business receipts in a manila envelope. This is still a good practice, but nowadays there are many apps and software options that can augment or even replace that envelope. Sync all your accounts, upload photos of receipts, write and deposit checks remotely, and enroll in autopay for recurring bills and invoices. The future is awesome.

Keep in mind, though, that technology is not infallible; it’s wise to review your transactions regularly to make sure your money is being moved where and how it should. An unwatched account is at a greater risk of fraud.

Also: store all your financial information in one place. This includes past tax records, as businesses are required by law to keep at least three years of tax documentation on hand in case of an audit. Prefer physical copies? Assign one drawer or folder to the task of storing your expenses. Hate all the paper? Keep two sets of digital records instead, one stored locally and one within the cloud. Because #techhappens.

Avoid Red Flags. Certain red flags can increase your chances of being audited. For example, large charitable donations, excessive business expenses, or claiming a home office deduction can draw scrutiny. While these deductions are perfectly legal, ensure they are well-documented and within reasonable limits.

Separate. They say you should never mix business with pleasure, and the IRS agrees: Keep your business and personal accounts separate. And by “separate,” we mean “as separate as possible.” Separate credit cards. Separate bank accounts. Maybe even separate banks, if you are especially prone to this habit. The more your expenses overlap—say your personal vehicle doubles as a work vehicle, or you bring your family along on a business trip and put it all on the company card—the more your expense reports will raise an auditor’s eyebrows. Co-mingling funds is one of the most common mistakes we see, and one of the biggest disasters. 

Be Careful with Deductions. This is one of the key areas that triggers disputes, so it’s critical to understand what does and does not qualify as a deductible. According to the IRS, business deductions should be both ordinary and necessary. In other words, any expense that is common for businesses in your industry and is necessary for keeping your business running can be a deductible. Pretty straightforward.

Except not really. The danger is in the expenses that seem deductible, but come with caveats (e.g., home office space, work lunches, capital expenses) or aren’t deductible at all (e.g., commuting costs, insurance, legal fees, business attire). When in doubt, ask your accountant. Aren’t you glad you have one?

Beware Employee Expenses. However much your personal finances can complicate your expense reports, your employees’ finances can complicate them even more. Remember: Only businesses can make business deductions. Employees cannot make business deductions on their personal taxes.

This is a relatively new change, within the past few years, so some people may find the consequences confusing. But the long and short of it is, if an employee incurs a personal expense on behalf of your business, they can only be reimbursed through your business. If your employees are frequently making business purchases, consider giving them a company credit card. It’s less hassle for everyone and makes those purchases more trackable to boot.

Record Charity with Clarity. Even if they are given in your business’s name, charitable contributions are not a business expense if you are a sole proprietor reporting your business income on a Schedule C. But they could potentially be an itemized deduction on your personal return. If the contribution is in exchange for a sponsorship, it can be categorized as advertising or marketing rather than charity.

Stay Compliant. Keep up with industry-specific regulations and ensure your business complies with all local, state, and federal laws. This includes labor laws, environmental regulations, and licensing requirements.

By following these tips, you can reduce your chances of being audited and have peace of mind during tax season. Remember, the key to avoiding an audit is accurate, honest, and well-documented reporting. If you’re ever in doubt, don’t hesitate to seek professional advice.

Ignoring technology is not an option in the fast-paced business world of today, and the accounting industry is no different. The level of application, however, should be limited.  Artificial Intelligence (AI) is revolutionizing the accounting industry by helping firms increase efficiency, boost accuracy, and provide greater value to their clients. That said, businesses are still […]

Ignoring technology is not an option in the fast-paced business world of today, and the accounting industry is no different. The level of application, however, should be limited. 

Artificial Intelligence (AI) is revolutionizing the accounting industry by helping firms increase efficiency, boost accuracy, and provide greater value to their clients. That said, businesses are still hesitant to integrate GenAI technology into their workflows. According to the Thompson Reuters Institute’s 2024 Generative AI in Professional Services Report (AI Report), 49% of tax and accounting firms currently have no plans to use GenAI tools, while 30% of them are still debating whether or not to do so. 

Their caution is warranted. You cannot trust AI with your accounting. 

CPA and owner of Go Figure Accounting Rachel Siegel says, “AI is proving to be a great tool and I’ve been having fun with it in my personal life. But professionally? Not yet. While AI can automate many routine tasks and enhance efficiency, it lacks the nuanced understanding of complex financial regulations and the critical thinking required for accurate accounting. Plus, AI can’t replace the judgment and ethical considerations that a real human brings to the table.”

Here are five reasons why you can’t trust AI with your accounting:

Data Security Concerns. Relying on AI for accounting involves sharing sensitive financial information with technology platforms, which can pose security risks. Human accountants are bound by confidentiality and professional standards to protect their clients’ data.

Lack of Nuanced Understanding. AI lacks the deep understanding of complex financial regulations and tax laws. Human accountants are trained to interpret and apply these rules correctly, while AI can only follow predefined algorithms.

Inability to Exercise Judgment. Accounting often requires professional judgment and ethical considerations, which AI cannot replicate. Human accountants can assess context, recognize subtleties, and make informed decisions that go beyond mere number crunching.

Risk of Errors and Oversights. While AI can handle repetitive tasks efficiently, it can also propagate errors if the initial data or programming is flawed. Human oversight is crucial to catch and correct these mistakes before they become significant issues.

Lack of Personalized Advice. AI cannot provide personalized financial advice tailored to an individual or business’s unique circumstances. Accountants offer customized strategies and insights based on their clients’ specific goals and needs.

According to Accounting Today, vice president of Intuit QuickBooks’s partners segment Jeremy Sulzmann pointed out that computers cannot take the place of the close relationship and comprehension that dependable professionals have with their clients. Accounting is still a relationship-based industry, and human oversight is still essential. 

Rachel agrees. “While technology and AI can assist with data processing and routine tasks, the true value of accounting lies in the personal insights, advice, and support that skilled accountants provide to their clients. It’s about understanding the unique needs of each business and individual, and tailoring solutions that technology alone simply can’t offer.”

As of January 1, 2024, millions of U.S. companies are now required to file first-time paperwork with the U.S. Department of the Treasury. Here’s what you need to know about the Corporate Transparency Act [CTA]. What is the CTA exactly? Enacted in 2021, the CTA aims to combat illicit activity including tax fraud, money laundering, and […]

As of January 1, 2024, millions of U.S. companies are now required to file first-time paperwork with the U.S. Department of the Treasury. Here’s what you need to know about the Corporate Transparency Act [CTA].

What is the CTA exactly?

Enacted in 2021, the CTA aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. It impacts millions of small businesses across the U.S. 

Beneficial Ownership Information – What is that and why should I care?

In 2021, as part of the Corporate Transparency Act, the government enacted Beneficial Ownership Information filing.  Beneficial Ownership Information (BOI) Reports must be filed by reporting companies within 30 Days of the company’s formation. If the reporting company already exists as of January 1, 2024, when it went into effect, it must file its initial BOI report by January 1, 2025. The failure to comply penalty with this new law may be up to $500 each day your business is out of compliance. Yes, this means if you are out of compliance for a year, you could incur penalties up to $182,500. There is a list of company types that are exempt from filing which you can find here.

Who is considered a beneficial owner of a company?

According to the CTA, an individual qualifies as a beneficial owner if they directly or indirectly have a significant ownership stake in a company. This person either exercises substantial control on the reporting company’s decisions or operations, owns at least 25% of the company’s shares, or has a similar level of control over the company’s equity.

What is substantial control really?

An individual exercises substantial control over a reporting company if the individual meets any of four general criteria:

The individual is a senior officer.

The individual has authority to appoint or remove certain officers or a majority of directors of the reporting company.

The individual is an important decision-maker.

The individual has any other form of substantial control over the reporting company.

What information must be reported about a company’s beneficial owners?

All reporting companies must provide their legal name and trademarks, as well as their current U.S. address, which could be either the address of its main business site or, for foreign-based companies, their U.S. operational location. They’ll also need to provide a taxpayer identification number and specify the jurisdiction where they were formed or registered.

This sounds complicated. Can you give me an example?

John and Jane formed a limited liability company (“LLC”) to own a rental property. Jane and John each own 50% of the entity and each is in a control position. The LLC has to file as a Reporting Company and both John and Jane have to file as beneficial owners.

Let’s say that Jane transferred her interests to her revocable trust. No biggie. She would still report that trust likely meets the exception as being “wholly revocable” and it would have no impact on her CTA filings.

Let’s say John got fancier and gifted his interests to a trust for his kids. John named his brother Tom as trustee. The trust benefits Tom’s three adult children. Tom and the three children have to file as Beneficial Owners.

If you are still confused by whether or not to file a BOI, we recommend filing the form to be on the safe side.

Can Go Figure file the BOI Report for me?

No. There are some legal issues surrounding CTA compliance as to whether or not  this is deemed as “the practice of law”.  Therefore, CPAs are being told by our insurance carriers not to do it. You can file the form yourself or have a legal professional file it for you. Our recommendation is to protect yourself and your business by hiring an attorney to file your BOI Report. In case you do not have an attorney to handle this for you, we recommend John T. Ankner of Saunders and Ankner, P.A., Attorneys at Law. John and his firm are ready to help you navigate the filing process in a timely and efficient manner. Email John@lawsaunders.com or visit www.lawsaunders.com.