The Corporate Transparency Act (CTA) was established by the Financial Crimes Enforcement Network (FinCen) as part of the 2020 Anti-Money Laundering Act. If you have an LLC, which many of us do for our real estate investing, then these new guidelines pertain to you. But it is not limited to just LLCs created for real estate investing. This act requires reporting for active business entities such as LLCs, corporations, and limited partnerships (“Reporting Companies”). If you would like more in depth information on the CTA, please see this article from attorney Mauricio Rauld, and the additional resources below.
I mentioned penalties in my title…
If you own 25% or more of your LLC/entity (Beneficial Ownership Interest, or BOI) and fail to file the necessary reports, you will be subject to possible penalties of $500/day to a max of $10,000 and/or two years in a hoosegow. I cannot speak to how the government will enforce these requirements or inflict such stiff penalties, but I just know with such steep fines at stake, this is not my battle or flag-planting moment to pick with the federal government.
Now, those of you who know me well understand that I am not a huge fan of technology, and I love the government and its ability to overregulate even less. But below both of those is spending money on things I can do myself, so I recently decided to try and tackle the reporting for all of my LLCs on my own.
I enthusiastically admit that the ease and time involved far exceeded my expectations. And it did not cost any money!
I need to stress that I am neither a lawyer nor a CPA so what I am providing should not be interpreted as advice. Please speak with your team of experts and decide what is best for you. However, in the time it took me to eat a 7-inch, Jersey Mike’s Big Kahuna sandwich, I had filed my reports and downloaded the confirmation for each. If, after speaking with your advisors, you also choose to self-file, set aside roughly 5 minutes for each report.
The ability to comply with these new regulations began on January 1, 2024. Go to the following link to file your report: https://www.fincen.gov/boi.
I chose the “File Online” vs. “File PDF” option as it sounded simpler (i.e. required fewer steps). Here is the information you will need for each entity:
- Name
- Birthdate
- Name of entity
- EIN of entity
- Email address
- Physical address
- Government-issued identifying number such as your driver’s license or passport number
- A saved JPG image of the above
*I would recommend doing this on a computer vs. a phone or tablet given that there are several screens and fields to complete.
Surprisingly, the government has provided a clear step-by-step process of explaining the screens and fields that you can read beforehand (see links below). Also, many of the fields have pop-up information buttons to help explain their meanings should you get stuck along the way.
Upon completion, you can download a copy of your report (highly recommended) which acts as your confirmation and provides you with a newly created BOIR ID unique to each LLC/entity report.
Deadlines
Does all of this still sound daunting and intimidating to you? Have no fear! If your LLC/entity was created before January 1, 2024, you have until January 1, 2025 to file. If you are starting an LLC/entity this year, you have 90 days after formation to comply with the terms of these new regulations. So regardless of your situation, you have some time. Still not up for the challenge? CPAs will provide information on these new guidelines/requirements; however, most consider it to be of legal nature and will not file the reports for you. So, be sure to educate yourself by reading up on the CTA and decide if you have the time to file yourself or if you want to pay a lawyer to file for you. Depending on your relationship with your advisors, they may not charge you like mine offered, but what else was I doing in between bites of my tasty sandwich?!
Additional resources:
- Introduction to Beneficial Ownership Information Reporting:
https://www.fincen.gov/sites/default/files/shared/BOI%20Informational%20Brochure%20508C.pdf
*Provides the background of why the government is asking for these reports.
- Q &A:
https://boiefiling.fincen.gov/help
*The resources in this link are PDFs so I did not want to attach them here, but the last bullet listed within (Online Step-by-Step Instructions) is incredibly helpful.
Sean Donnelly is one of the founders of Left Field Investors. He began investing in real estate in 2007 when he bought a flip at auction with a friend. While the market tanked shortly after, the multifaceted benefits of real estate investing became clear. He currently owns single family and duplex rentals but has shifted to investing primarily in passive commercial real estate syndications.
This article is for educational purposes only and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision. All investments involve the risk of loss, including the loss of principal. Past performance, and any performance results reflected in this article, is not an indication of future results.
