Are you aware of the new Corporate Transparency Act Coming in 2024 (every LLC)

[John Malone]

What's all the Hype with the new law? Well this will apply to your RE LLCs…

A new law was passed back in 2020 which has not been on the radar for most business owners. Let's start with the fact that the U.S. Treasury predicts 32,000,000 businesses will now have to comply with these new laws starting in 2024!

What is the Corporate Transparency Act?

On a worldwide basis, the US is considered a business haven where many can hide their identities. For various reasons, the US government wants to understand the "beneficial ownership" of certain businesses. FINCEN will administer this.

Who is Included?

Pretty much every small business other than some obscure ones that are excluded (see below)

If you have 12 Single Member LLCs that own your rental properties. Guess what?! You know have 12 FinCen reports to file.

Who is Excluded?

There are many excluded, niche groups (beyond the scope of this post), but here are the ones that you could fall under:

Large Businesses

20+ FULL TIME W2 US based employees; AND

U.S. Office; AND

$5M or more in revenue

SEC regulated investment companies + certain business already under strict regulations from the Federal Gov't

Who is a "beneficial owner"?

This is where it gets tricky and the real work will come in. The regulations provide both insight and ambiguity.

25% or more owner of the entity; OR

One who exhibits significant control over the entity. This could be a 0% owner by the letter of the law...

What are the Reporting Basics?

The Initial Filing:

Any existing business not excluded must begin to file in 2024 via the FinCen network filing process. The "Initial Filing" is extremely important to get this right the 1st time as there are limited safe harbors for mistakes to avoid the penalties.

For new entities formed after 1/1/2024, there are 30 days to report! Penalties begin on day 31 if you do not file.

Ongoing Annual Filing & Maintenance:

Changes to Beneficial Ownership = 30 days to report change to FinCen!

Address changes

Passport changes

Name changes via marriage

Other ownership changes

What's the big deal? What if we don't comply right away?

$500 per day penalty up to $10,000 and up to 2 years in prison for willful evasion per entity

No cap on the amount of entity penalties

Check with your CPA, Tax Advisor or attorney on this as it is a freight train of compliance coming! Some are helping, some are not. At our firm (tax advisory) we are offering a service to help clients with this and we expect many tax/cpa/law firms will as well.

[Chris Seveney]

Quote from @John Malone:

What's all the Hype with the new law? Well this will apply to your RE LLCs…

A new law was passed back in 2020 which has not been on the radar for most business owners. Let's start with the fact that the U.S. Treasury predicts 32,000,000 businesses will now have to comply with these new laws starting in 2024!

What is the Corporate Transparency Act?

On a worldwide basis, the US is considered a business haven where many can hide their identities. For various reasons, the US government wants to understand the "beneficial ownership" of certain businesses. FINCEN will administer this.

Who is Included?

Pretty much every small business other than some obscure ones that are excluded (see below)

If you have 12 Single Member LLCs that own your rental properties. Guess what?! You know have 12 FinCen reports to file.

Who is Excluded?

There are many excluded, niche groups (beyond the scope of this post), but here are the ones that you could fall under:

Large Businesses

20+ FULL TIME W2 US based employees; AND

U.S. Office; AND

$5M or more in revenue

SEC regulated investment companies + certain business already under strict regulations from the Federal Gov't

Who is a "beneficial owner"?

This is where it gets tricky and the real work will come in. The regulations provide both insight and ambiguity.

25% or more owner of the entity; OR

One who exhibits significant control over the entity. This could be a 0% owner by the letter of the law...

What are the Reporting Basics?

The Initial Filing:

Any existing business not excluded must begin to file in 2024 via the FinCen network filing process. The "Initial Filing" is extremely important to get this right the 1st time as there are limited safe harbors for mistakes to avoid the penalties.

For new entities formed after 1/1/2024, there are 30 days to report! Penalties begin on day 31 if you do not file.

Ongoing Annual Filing & Maintenance:

Changes to Beneficial Ownership = 30 days to report change to FinCen!

Address changes

Passport changes

Name changes via marriage

Other ownership changes

What's the big deal? What if we don't comply right away?

$500 per day penalty up to $10,000 and up to 2 years in prison for willful evasion per entity

No cap on the amount of entity penalties

Check with your CPA, Tax Advisor or attorney on this as it is a freight train of compliance coming! Some are helping, some are not. At our firm (tax advisory) we are offering a service to help clients with this and we expect many tax/cpa/law firms will as well.

This is another reason why I see 1M posts on hear about people wanting to transfer properties to their LLC because some guru they paid $5k told them too. All they are doing is adding additional costs and getting zero protection. Also people like to feel more important by having LLC or trusts to hide their identity. Honestly, no one gives a flying firetruck unless you are a celebrity. No one is going to come to your door stalking you, but feel free to pay a few grand a year to "hide" your identity that will be able to be found in 15 minutes or in a request from the tenant if they request ownership of the LLC or the operating agreement to understand who they are signing a lease with.