If You Have a Holding Company for Your Real Estate - Avoid this $500 Per Day Fine

Beginning January 1, 2024, the Corporate Transparency Act (CTA) passed by Congress in 2021, requires many companies to file information on the ownership of the company to the Financial Crimes Enforcement Network (FinCEN).  The reason for this is primarily to thwart money-laundering activities and to make it harder for criminals to hide or benefit from ill-gotten gains by setting up shell companies.  Most commercial real estate investors set up new LLCs each time they buy a piece of property; these LLCs are now required to file a Beneficial Ownership Information Report (BOIR) with FinCEN.  For any existing company, the deadline to file is January 1, 2025.  For new LLCs set up in 2024, the owners will have 90 days to file their BOIR while in 2025, new LLCs will need to file within 30 days of registering a new company.  Any changes in ownership or updates must be filed within 30 days of the change.  The penalties for failure to provide this information are steep and include civil penalties of $500 per day for each day that the violation continues, and criminal penalties with fines up to $10,000 and 2 years imprisonment.

Filing the required information can be done electronically on the FinCEN website.  You can access the BOI E-Filing system and then select “File BOIR.”  I recently filed using the Online option (there is a PDF option as well) and it took about 15-20 minutes for a single member LLC.  To file correctly, you must have your entity EIN number; a copy of your driver’s license or passport to upload; provide information on anyone who owns or controls 25% or more of the company; and submit a BOIR on every LLC, if you have more than one.

For those who have numerous LLCs set up with the same ownership information, I recommend first setting up a FinCEN identifier, so you only need to input the ownership information and upload your ID one time.  Once that is submitted, you will get a FinCEN Identifier number that you can use for the ownership information tab for each submittal, instead of entering the same information numerous times.  The FinCEN identifier can be set up by going to the FinCEN ID application website and then clicking on “Sign in or Create an Account with Login.gov”.

This is by no means meant to be a comprehensive blog on the new filing requirements, but a notice to real estate investors and others that this requirement now exists and the penalties that exist if you do not file on time. I found the Frequently Asked Questions page very helpful and there is also a list of companies that are exempt from the reporting requirement.

Dan Stiebel, CCIM

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