Medical Spas May Have New Reporting Requirements in 2024
In 2024, a novel annual federal reporting obligation is poised to encompass the majority of small business owners, including those in the medical spa sector. While the prospect of compliance might not spark immediate enthusiasm, understanding the “what,” “why,” and “why me” is crucial. Here’s an endeavor to address these questions and provide available information to assist in maintaining compliance.
Why is a Report Necessary?
Commencing in 2021, the Corporate Transparency Act (CTA) was enacted, incorporating diverse measures to combat financial crimes like money laundering and tax fraud. Among these provisions is a mandate for businesses to report details about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of the Treasury. This obligation to report beneficial ownership information (BOI) takes effect on January 1, 2024. FinCEN offers a BOI webpage with FAQs and a small-entity compliance guide to aid in understanding this upcoming reporting requirement.
Who Must Report?
Determining which businesses are obligated to report and which are exempt involves intricate rules. FinCEN provides helpful flow charts to navigate this determination process. In general, U.S.-based businesses formed by state filing, such as LLCs, PCs, or corporations, may be required to report unless exempted. While exemptions include 23 categories, many are not pertinent to typical medical spas or aesthetic practices. Exclusions tend to apply to banks, financial institutions, government entities, insurance companies, non-profits, and similar “highly regulated industries,” but not medical or healthcare entities.
A potential exemption category for businesses across industries is termed a “large operating company,” requiring specific criteria fulfillment. Generally, a large operating company employs over 20 people and has gross sales exceeding $5 million. As most medical spas fall within these thresholds, they may need to submit the BOI report, and consulting the FinCEN resources is advised to determine individual compliance.
What Information is Reported?
For businesses subject to reporting, the required information is fundamental. For the company itself, details such as names, trade names, addresses, state of formation, and tax ID number are needed. Regarding each “beneficial owner,” the report should include their name, date of birth, address, and a copy of a state-issued ID like a passport or driver’s license. Beneficial owners are entities or individuals owning or controlling 25% of the company or exerting substantial control over it.
Comprehensive rules and details govern substantial ownership and calculations, necessitating careful review of guidance to ascertain beneficial owner qualifications. Special rules on additional reporting and information types are present, emphasizing the importance of reviewing the compliance guide for completeness.
Where is the Report Filed?
The report will be submitted through FinCEN’s BOI webpage. Although the forms and login details are currently unavailable, additional guidance will be accessible on the platform.
When is the Reporting Deadline?
The excitement must be contained until January 1, 2024, the earliest date for report acceptance. The filing deadline depends on the business formation date. If the business operates in 2023, the initial report must be filed before January 1, 2025. For businesses formed in 2024, the report is due within 30 days.
It’s essential to recognize that this new reporting requirement is not yet fully implemented, and rules may evolve. Collaborating with business and legal advisors is imperative to discern and fulfill your business’s compliance obligations. Non-compliance, as per FinCEN, may result in civil or criminal penalties, including fines and imprisonment, underscoring the importance of seeking professional guidance for compliance.
