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The Corporate Transparency Act (CTA), effective from January 1, 2024, significantly changes the reporting requirements for real estate transactions. This legislation aims to combat financial crimes by increasing transparency about the beneficial ownership of certain entities. For business owners in the real estate sector, it’s crucial to understand these requirements to ensure compliance and avoid penalties.
What is the Corporate Transparency Act?
The CTA mandates that certain companies report beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This law targets shell companies often used for money laundering, terrorism financing, tax evasion, and other illegal activities.
Who Needs to Report?
A “reporting company” under the CTA is any domestic or foreign corporation, limited liability company, or similar entity formed or registered to do business in any state. However, not all entities are required to report. Exemptions exist for entities with heightened reporting obligations, such as publicly traded companies and most financial services institutions. Real estate companies may qualify for an exemption under the “large operating company” category if they meet specific criteria: having more than 20 full-time employees, generating over $5 million in annual revenue, and operating from a physical office within the United States.
Determining Reporting Obligations
Each entity within a real estate structure must be assessed individually to determine if it qualifies as a reporting company. Entities that do not meet exemption criteria must report beneficial ownership information: name, address, date of birth, and identification number (e.g., passport or driver’s license number).
Key Deadlines
- Entities formed before January 1, 2024: Report by January 1, 2025.
- Entities formed between January 1, 2024, and January 1, 2025: Report within 90 days of formation.
- Entities formed after January 1, 2025: Report within 30 days of formation.
Changes in beneficial ownership or exemption status must be reported within 30 days.
Practical Tips for Compliance
To comply with the CTA, real estate business owners should:
- Regularly Audit Ownership Structures: Ongoing monitoring ensures that all entities are correctly reporting beneficial ownership information.
- Stay Informed About Changes: Mergers, reorganizations, or changes in ownership can affect reporting obligations.
- Implement a Tracking System: Use software or manual tracking to keep up with reporting deadlines and changes in exemption status.
Consequences of Non-Compliance
Failure to comply with the CTA can result in significant penalties, including a civil fine of up to $500 per day and criminal penalties of up to $10,000 or imprisonment for up to two years.
Conclusion
Understanding and adhering to the Corporate Transparency Act’s requirements is essential for business owners in the real estate sector. Ensuring compliance can protect your business from hefty fines and legal consequences.
Need help navigating the Corporate Transparency Act? Schedule an appointment with our expert business litigation law firm today. Our experienced attorneys can guide you through compliance, ensuring your business stays protected.
