If you are a real estate investor, chances are good you have at least one LLC that you are conducting business out of. Most of the REIs I know have MANY LLCs they are using to hold real estate. If either of these statements apply to you, then you will want to make sure you understand the new Beneficial Ownership reporting requirements.
Beginning in 2024, filing of Beneficial Ownership Information (BOI) with the Financial Crimes Enforcement Network (FinCEN) is a requirement under the Corporate Transparency Act (CTA). The purpose of this requirement is to enhance transparency and combat money laundering, terrorist financing, and other illicit activities.
What is Beneficial Ownership Reporting?
This is a one time filing and does not need to be renewed every year. However if identifying information about beneficial owners changes (i.e. – address change), you will be required to update that information.
There are 2 primary data points that FinCEN wants to identify.
- Anyone who has substantial control of the entity (Owners, Officers, and Managers)
- Anyone who has beneficial ownership of 25% or more of the entity.
Most small business legal entities (LLCs and Corps) will be subject to these reporting requirements., but there are exemptions for certain large businesses (detailed below).
If your entity was in existence before January 1st, 2024, you will have until the end of 2024 to complete BOI reporting. If you start a new entity after January 1st, 2024, you will have 90 days to complete your BOI reporting.
Most real estate investors have at least one LLC that will be required to report BOI. If you have an old LLC that is inactive and no longer in use, it may be a good idea to dissolve it.
How do I file BOI?
Beware of scammers that may approach you about filing your BOI for a fee. This report is free to file and is relatively easy to handle on your own.
https://www.fincen.gov/boi is where it all begins. Click on the BOI reporting brochure to familiarize yourself with the process before beginning. When you are ready, click on File BOIR to begin. The process is very intuitive easy to follow. You will need a scanned copy of your state issued ID or passport to complete the report. You will also need your entity’s EIN.
What happens if my company doesn’t report BOI on time?
According to the FinCEN compliance guide, the willful failure to report accurate beneficial ownership information could result in severe penalties. Civil penalties could include a fine of $500 for each day the violation continues. Criminal penalties could include jail time.
Is there an exemption for BOI Reporting?
BOI reporting is required for most small business entities (LLC and Corporations). However, there are 23 exemptions to BOI reporting, detailed in the chart below:
In regards to exemption 23, all 6 of the following criteria must apply to claim this
exemption:
