The Corporate Transparency Act: What You Need to Know to Avoid Penalties

Many small businesses, including dental practitioners, have not heard about this important new legislation and are unaware that they need to file a report by year-end. With significant penalties associated with failure to file, here are a few important takeaways on this potentially complicated topic:

Why does this legislation matter to me?

This new law applies to many small businesses, including dental practices. Penalties for failure to file will start after Jan. 1, 2025, which could be as high as $591 a day. Fines can even go up to 10% of your company’s annual receipts.

Who has to report this information?

A reporting company is any corporation, limited liability company or other similar entity that was created in the U.S. by the filing of a document with the secretary of state or similar office. It does not qualify for any of the exemptions provided under the Corporate Transparency Act.

The only exception that may pertain to dental practices would be those that fall under the large operating company (#21). This exclusion states that an office that employs 20 or more full-time employees (30 hours of service per week) and has more than $5,000,000 in gross receipts or sales may be exempt from this reporting requirement.

For more information, please refer to the Small Entity Compliance Guide for a list and criteria of exemptions.

Is a sole proprietorship a reporting company?

No, unless the sole proprietorship was created by filing a document with the secretary of state or similar office. If you are unsure whether this pertains to you, we suggest you contact your attorney or accountant to verify.

When do I need to report this information?

A company that was created before Jan. 1, 2024, will have until Jan. 1, 2025, to file its initial beneficial ownership information report. A reporting company that was created after Jan. 1, 2024, and before Jan. 1, 2025, will have 90 calendar days after receiving notice of the company’s creation to file its initial beneficial ownership information report.

What data do I need to file in this report?

• Your legal name, address and business tax ID number. This information can easily be pulled from your business tax return.
• The information of the person filling out the report, which includes the individual’s name or company name, tax ID number and address. You, your accountant, attorney or another trusted individual will most likely fill out this report.
• Information about each beneficial owner of the company. This is an individual who either directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of a reporting company’s ownership interests. To determine if a person exercises substantial control over a reporting entity, review the four categories found in the Small Entity Compliance Guide to determine if you meet any of them.

What should I do next?

If you have any questions about whether you need to file this report, contact your accountant or attorney. If you do, for many dental practices with single owners, the process should be fairly simple with minimal information needed. The website to file this data is relatively simple, with five tabs and the information required above. Having your business tax return in front of you should make this process straightforward.

With many small business owners having limited knowledge of the Corporate Transparency Act, this new legislation may seem overwhelming. But failure to file can result in hefty fines and significant penalties. If you have any questions about your responsibilities, please contact your accountant, attorney or financial advisor for more information.

If you would like to explore strategies to safeguard your practice, our team would love to help! Schedule a conversation with a practice integration advisor today!

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information. R-24-7601