Every small business owner who owns one or more legal entities such as an LLC or corporation that is involved in the real estate industry needs to be aware of a new federal reporting requirement that went into effect on January 1, 2024.
Real estate industry considerations for FinCEN Beneficial Ownership Information reporting requirements
Certain LLCs, corporations and other entities are required by a federal statute called the Corporate Transparency Act (CTA) to file a beneficial ownership information (BOI) report with a division of the Department of Treasury called the Financial Crimes Enforcement Network or FinCEN. Entities required to make this filing are called “reporting companies”.
The use of entities such as LLCs and corporations is widespread in the real estate industry. These entities are created to be, among other things, brokers, dealers, agents, developers, appraisers, managers, and sellers. There are real estate investment groups where a number of individuals pool their money to buy real estate to generate income, as well as entities that are created to buy a residence because the individual owner (such as a famous actor or athlete) wishes his or her address to remain private. And each LLC and corporation in the real estate industry that meets the definition of a reporting company will have to file a BOI report. A failure to comply can result in harsh monetary penalties and even possible imprisonment.
This article will answer some of the questions the owners of entities in the real estate industry are asking about beneficial ownership information reporting.
Did you create an LLC, corporation, or other entity that was created by filing a document with a secretary of state or equivalent office to own your real estate industry company? Or create it under the laws of a foreign country and register it to do business in the U.S. by filing a document with a secretary of state or equivalent office? If so, under the rule implementing the reporting requirement, your real estate industry company has to file a BOI report unless it qualifies for one of the CTA’s 23 exemptions.
Related resource: Determine if required to file. Take the quiz.
The real estate industry does not have specific exemptions. Most exemptions are for companies that already file reports with government agencies that list beneficial owners, such as securities reporting issuers, or industries already subject to substantial government regulation like financial institutions or insurance companies. It is important for all business owners to familiarize themselves with all 23 exemptions to see if any apply. For example, larger real estate companies may qualify for the “large operating company” exemption – which applies to companies with more than 20 full-time employees in the U.S., that operate from a physical office in the U.S., and that filed a federal tax return for the previous year showing more than $5 million in gross receipts or sales from U.S. sources.
The following information has to be reported about the real estate industry company:
- legal name
- trade and dba names
- principal place of business address
- jurisdiction of formation (or of first registration if a foreign company)
- taxpayer identification number
Also, the following information has to be reported about each of the real estate industry company’s beneficial owners:
- legal name
- date of birth
- residential address
- unique number from an acceptable document such as a passport, driver’s license, or state ID, and an image of the document.
In addition, reporting companies in the real estate industry created on or after January 1, 2024 will have to provide the same kind of information for their company applicant or applicants that has to be provided for a beneficial owner, except that individuals who are acting as company applicants in the course of their employment provide their business address instead of their residential address.
Who are considered the beneficial owners and company applicants of a real estate industry reporting companies?
A beneficial owner is an individual who directly or indirectly either exercises substantial control over the company or who owns or controls at least 25 percent of its ownership interests.
A company applicant is the individual who directly files the document that creates or first registers the company and the individual that is primarily responsible for directing or controlling the filing of the document, if there is more than one person involved.
If your real estate industry company existed or was registered before January 1, 2024, its initial BOI report has to be filed between January 1, 2024 and January 1, 2025. Initial reports of companies created or first registered on or after January 1, 2024 and before January 1, 2025 have to be filed within 90 calendar days of receiving actual or public notice of its creation or registration, whichever comes first. Initial reports of companies created or first registered on or after January 1, 2025 have to be filed within 30 calendar days of receiving actual or public notice of its creation or registration, whichever comes first. If there is a change in information reported about the company or the beneficial owners, an updated report has to be filed within 30 calendar days of the change.
Where and how is the BOI report of my real estate industry company filed and is there are filing fee?
The BOI report, and any required updates, are filed with FinCEN, electronically, on FinCEN’s website. There is no filing fee.
Where can I get more information about the CTA’s impact on small businesses in the real estate industry?
This article has provided information on BOI reporting under the Corporate Transparency Act for small business owners in the real estate industry. The CTA itself, and the rule implementing the reporting requirement, are detailed and complex and beyond the scope of this article.
To learn more about how CT Corporation can help, contact a CT Corporation service representative or visit our Corporate Transparency Act resource page where you can sign up for updates.
And take the quiz to help determine your Beneficial Ownership Information filing status.