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Howell, Buchan & Strong - Professional License Defense Attorneys in Florida

Does the CTA Require Your Entity to File a BOI Report?

February 27, 2024
Est read time: 2 minutes

As the calendar flipped to 2024, the Corporate Transparency Act (CTA) took effect and revolutionized the reporting requirements for entities conducting business in the United States. The CTA requires entities defined as “reporting companies” to report certain identifying information about the entity, its beneficial owners, and company applicants to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Reporting companies formed before January 1, 2024, must file Beneficial Ownership Reports (BOI) reports with FinCEN within the calendar year, but reporting companies formed after the new year must file BOI reports within 90 days of filing. The 90-day reporting requirement for new companies will shorten to 30 days after January 1, 2025. Additionally, reporting companies must update their BOI reports within 30 days of any change to the information.

Failure to comply with FinCEN’s reporting requirements will result in serious civil and criminal penalties. Health care service providers should determine whether their business entity or entities fall under the scope of the Corporate Transparency Act to avoid sanctions. So, how do you determine whether your entity needs to file a BOI report with FinCEN?

What Is a Reporting Company?

Reporting companies generally include corporations, limited liability companies, and other similar entities. The defining characteristic of reporting companies are created or registered to do business in the United States by filing documents with the Secretary of State or similar office under state law. Sole proprietorships, general partnerships, and other associations that are not created through filing documents are not considered reporting companies. Thus, companies structured as C corporations, limited partnerships, and LLCs likely fall under the purview of the CTA subject to a few exemptions.

Two exemptions that affect the health care sector are the large operating entity exemption and the exempt entities’ wholly owned subsidiaries exemption.

The large operating entity exemption is available for entities that meet the exemption’s three requirements: the entity must (1) operate from a physical commercial street address in the United States, (2) have at least 21 full-time employees, and (3) generate more than $5 million in annual U.S. gross receipts as reported on the entity’s prior year tax filing. The subsidiaries exemption protects wholly owned subsidiaries of exempt entities from reporting requirements. This exemption does not apply to upstream entities, meaning that holding companies are not exempt from reporting requirements regardless of whether their investment is an exempt entity.

Wondering if this Statute Will Affect You? We Are Here to Help.

The CTA harshly penalizes any individual, reporting company, or other entity who fails to file a BOI report to FinCEN. Fines can start at $10,000 and can accrue $500 each day a report is outstanding. Every health care service provider should prioritize checking their entity structure to make sure they comply with the CTA’s reporting requirements if they fall under its purview.

If you are operating a business that requires you as the owner to file documents with the Secretary of State or under a similar state law entity, your business likely needs to file a BOI report before the January 1, 2025, deadline. Call the law offices of Howell, Buchan & Strong at (850) 877-7776 now to arrange a free, no obligation consultation to discuss your business entity structure and whether it is subject to CTA reporting requirements.

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