The Corporate Transparency Act was passed by Congress in 2021 and signed into law by President Biden. It went into effect on January 1, 2024. Every real estate investor, entrepreneur, and small business will be impacted.

What You Need to Know About the Corporate Transparency Act

The Corporate Transparency Act requires entities to file a beneficial ownership information report with the Department of Treasury’s Financial Crimes Enforcement Network, an agency better known as FinCEN.

Which Entities Must Report Based on the Corporate Transparency Act

Any entity created by the filling of a document with the secretary of state or similar office within the state. The following are all required to report if they have a tax ID number and have direct or indirect control or ownership of $1,000 or more in assets.

• C-Corporations
• Sub-S Corporations
• LLCs taxes as Corporations or Partnerships
• LLCs are treated as disregarded entities.

Attorney Jeff Watson joined to talk about the new Corporate Transparency Act.

He has some things that he advises you to do, right now:

• Go buy identity theft insurance, especially if you have any assets.
• It’s going to be harder to form LLCs after January 1, so you might want to set them up before the end of the year.
• You are going to have to report on all LLC, any owner of 25% or more so they know where money is going and who has what.

Watch the replay of the October 2023, National REIA Now Meeting:

Beneficial Owners Need to Report

Either exercising substantial control over the company or controlling at least 25% of a reporting company makes you a beneficial owner. So if you have equity in the business, interest in a joint venture, convertible interest, or bearer shares you are a beneficial owner. If you control ownership via a trust, as a beneficiary, grantor, intermediary, or blocker, you are a beneficial owner. As a Beneficial Owner, You are required to report to FinCEN your name, birth date, address, a unique id number from a recognized issuing jurisdiction and a photo of that document.

What Does Substantial Control Mean?

For the CTA, Attorney Jeff Watson tells us that you have substantial control if you have any of the following

• they serve as a senior officer or manager of the entity that must report beneficial ownership information to FinCEN,
• they have authority over senior officer appointments,
• they have authority over a majority of the board of directors, or
• they influence important decisions, including those related to business operations, asset transactions, equity issuance, borrowing money, entering into contracts, and governance documents.
• There is a longer list within the act and it is very open to intepretation as to what “substantial control” actually means.

Time Lines For Reporting

While this act went into effect on January 1, 2024, if your company has existed before that date you must file your initial reports within a year. But new companies created since January 1 will have 90 days (was originally 30 days).

If there is any change in the beneficial ownership through a sale, merger, acquisition or death, or if you discover something was reported incorrectly, you have 30 days to refile.