Navigating the Corporate Transparency Act: What Dentists Should Know
Your Dental Practice Transition Consultants
A recent federal mandate, the Corporate Transparency Act (CTA), has brought about significant changes for businesses, including those in the dental sector. This legislation requires dentists with business entities to disclose personal information and photographs of individuals with ownership and control over their practices. In this article, we'll delve into the essential aspects of the CTA and its implications for dentists.
Why Does It Matter for Dentists?
From Wall Street to Main Street, the CTA impacts a vast majority of private and many nonprofit entities, including dental practices. Compliance with the CTA is crucial for dental business owners, not just for initial reporting but also for ongoing compliance and coordination with other information disclosures such as licensure and ownership disclosures.
Understanding the Corporate Transparency Act:
The CTA mandates the reporting of personal direct and indirect beneficial ownership and control information for businesses operating in the U.S. This includes personal identifying information (PII) like name, date of birth, physical home address, and even photographs. The Financial Crimes Enforcement Network (FinCEN) is establishing the Beneficial Ownership Secure System (BOSS) to manage this influx of information, aiming to prevent money laundering, illicit financial activities, corrupt practices, and terrorist financing.
Who Must Report?
Starting January 1, 2024, dentists must report PII for natural persons owning 25% or more of any class or category of profit ownership in a dental business, or those with "substantial control" over the business. Substantial control refers to direct or indirect influence over the business's operations.
Ongoing Reporting Obligations:
After the initial report, dentists must update the information within 30 days of any subsequent event that renders the reported information inaccurate. Determining ownership and substantial control varies between businesses, requiring careful analysis and professional advice.
Exempt Entities:
Certain entities are exempt from CTA compliance, including publicly traded companies, insurance businesses, and federally tax-exempt non-profit entities. Dentists should pay attention to two exemptions relevant to the dental sector:
- Large Operating Entity Exemption: Available for businesses with a physical U.S. commercial street address, 21 or more full-time U.S. employees, and generating over $5 million in annual U.S. gross receipts. Dental businesses relying on part-time employees or specific organizational structures should assess eligibility.
- Exempt Entities’ Wholly Owned Subsidiaries Exemption: Applies to subsidiary entities wholly owned by exempt entities. Complex organizational structures may require careful analysis, as joint ventures may not qualify for this exemption.
Considerations for Dental Practices:
Dental businesses structured to comply with state laws on the corporate practice of dentistry may face challenges. Administrative services arrangements and reporting requirements related to indirect leadership and control of dental practice entities need careful consideration.
Licensure and Ownership Disclosures:
As dental practices regularly disclose ownership information, the CTA's BOSS system offers regulatory agencies a new tool to verify ownership structures. Dentists should align CTA disclosures with state licensure definitions, considering variations.
Compliance and Consequences:
Businesses must constantly compile, maintain, and update reported PII for CTA compliance. Non-compliance carries steep fines and, for willful misconduct, potential jail time. Increased IRS enforcement and access to the BOSS database heighten the importance of accurate reporting.
Access to BOSS:
Law enforcement at federal, state, and local levels, along with financial institutions (with customer consent), can access BOSS. CTA disclosures may become integral to corporate and regulatory diligence for future transactions.
Conclusion:
The Corporate Transparency Act introduces a new era of beneficial owner reporting for U.S. businesses, including dental practices. As compliance is both mandatory and advisable, dentists should consult their legal teams for guidance on navigating the complexities of the CTA. Embracing this change is essential, and now is the time to ensure understanding and adherence to these new reporting requirements. Contact US Dental Transitions today for dental practice transition consulting.
