The Corporate Transparency Act (CTA) has been a hot topic in recent months, with a major legal challenge temporarily putting the law on hold. However, a federal appeals court has now reinstated the CTA, meaning businesses—including med spas—must comply with its reporting requirements once again.
So, what does this mean for med spa owners? Here’s a breakdown of what you need to know.
What Happened?
The CTA was challenged in a lawsuit arguing that it overstepped constitutional boundaries by imposing undue regulatory burdens on small businesses. In March 2024, a district court ruled in favor of the plaintiffs, temporarily blocking the enforcement of the CTA. However, in a recent decision, a federal appeals court overturned that ruling, stating that the law falls within Congress’s authority to regulate financial transparency and combat illicit financial activities. As a result, the reporting requirements are back in effect, and businesses must now prepare to comply.
What Is the Corporate Transparency Act?
The CTA, which went into effect on January 1, 2024, is designed to combat financial crimes like money laundering by requiring certain businesses to report their beneficial ownership information (BOI) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The goal is to increase transparency and prevent anonymous shell companies from being used for illicit activities.
Who Needs to Report?
Most med spa owners will fall under the CTA’s reporting requirements. The law applies to corporations, LLCs, and other similar entities registered in the U.S., with some exceptions for larger companies or those in heavily regulated industries.
If your med spa is a small business structured as an LLC or corporation, you will likely need to file a report.
What Information Needs to Be Reported?
Entities subject to the CTA must provide the following details about their beneficial owners (anyone who owns or controls at least 25% of the company or exercises substantial control over it) and business:
- Full legal name
- Date of birth
- Current residential address
- A unique identification number from a passport, driver’s license, or other government-issued document
- Entity Name
- Entity EIN
- Entity business address
- Any DBAs
This information must be submitted through FinCEN’s Beneficial Ownership Secure System (BOSS) portal.
Key Deadlines for MedSpa Owners
- Existing businesses (formed before January 1, 2024) have until January 1, 2025, to file their initial reports.
- New businesses (formed in 2024 or later) must file within 90 days of registration.
- Any changes to beneficial ownership must be reported within 30 days of the change.
What Happens If You Don’t Comply?
Failing to comply with the CTA can result in civil and criminal penalties, including fines of up to $500 per day and possible imprisonment for willful violations. Given the serious consequences, it’s critical to take these requirements seriously.
What Should You Do Now?
- Determine if you need to file. If you operate as an LLC or corporation, you likely do.
- Gather the required information. Make sure you have the necessary details for all beneficial owners.
- Submit your report on time. Use FinCEN’s BOSS system to file before your deadline.
- Stay updated on changes. Compliance regulations may evolve, so staying informed is key.
At Lengea Law, we help you navigate complex regulations like the CTA and can file the BOI at your request. If you have questions about your reporting requirements or need legal guidance, contact us today!