As of January 1, 2024, the US Corporate Transparency Act (CTA) requires corporations, limited liability companies, limited partnerships and other similar entities to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau within the US Department of the Treasury. Although the US District Court for the Northern District of Alabama declared the CTA unconstitutional in March 2024, the decision in the underlying case is limited to the plaintiff. Therefore, all other entities – including virtual care providers – are still required to comply with the CTA.
Following are key considerations for virtual care providers utilizing friendly PC structures.
- Are professional entities (i.e., PCs, PLLCs, PAs) subject to CTA reporting requirements? Yes. The CTA includes certain exemptions, but these are unlikely to apply to a professional entity formed to provide virtual care services.
- To whom do CTA reporting requirements apply? The reporting obligation is on the reporting company (i.e., the entity formed by a filing in a US state) – not on the beneficial owners or the person or entity assisting with the formation of the reporting company (i.e., the company applicant, defined as the individual who directly files the document that forms the reporting company and the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing, with no more than two company applicants). However, individuals and entities other than the reporting company can be held liable for willful violations of the CTA (e.g., an individual who willfully fails to report complete beneficial ownership information or an individual who files – or causes the filer to file – false information with FinCEN).
- What reporting is required? The reporting company must visit FinCEN’s Beneficial Ownership Information (BOI) website to complete and file a beneficial ownership information report (BOIR). Reporting companies formed before January 1, 2024, have until January 1, 2025, to file a BOIR; those formed during 2024 must file a BOIR within 90 calendar days of the effective date of formation; and those formed on or after January 1, 2025, will have 30 calendar days to file a BOIR.
- Who are beneficial owners? Are friendly physician owners beneficial owners? Reporting companies must identify each of their beneficial owners, defined as any individual who, directly or indirectly, exercises substantial control over the reporting company or who owns or controls at least 25% of the ownership interests in a reporting company. Individuals with substantial control include senior officers (e.g., president, chief executive officer, chief operating officer, chief financial officer and general counsel), as well as anyone who can make important decisions on behalf of the reporting company, including the power to appoint and remove senior officers or a majority of the board of directors (or similar governing body). Accordingly, friendly physician owners are likely to be beneficial owners.
- What information must be reported in a BOIR? Reporting companies must provide the following information:
- >> Regarding the beneficial owner: name, date of birth, residential address and photo ID
- >> Regarding the entity: full legal name, trade names or DBA names, business address, jurisdiction of formation or registration, and federal taxpayer identification number (FEIN)
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- >> Regarding the company applicant (only for reporting companies formed or registered on or after January 1, 2024): name, date of birth, business or residential address, and photo
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- Are there ongoing filing obligations? After the initial filing, there is no annual or quarterly filing requirement. However, changes in information must be reported (see question 7, below)
- What is required when a professional entity undergoes a change to its name, address or ownership? A change to the information reported on the BOIR triggers a requirement to file an updated report within 30 calendar days of the change.
- Are there penalties for noncompliance with the CTA? Yes. There are civil and criminal penalties for willful reporting violations
- Where can I learn more about the CTA’s requirements? How can McDermott help? McDermott’s Corporate Transparency Act Resource Center includes a variety of helpful information regarding CTA reporting requirements. McDermott can help with CTA obligations, such as assessing your affiliated professional entity’s reporting obligations, eligibility for exemptions and compliance requirements, as well as providing education and training for your legal and compliance teams. Please contact your regular McDermott lawyer with any CTA questions.
