Understanding the Corporate Transparency Act: What It Means for Real Estate Investors
Beginning January 1, 2024, a major change in federal reporting requirements went into effect — one that every real estate investor, entity owner, and business operator needs to understand. The Corporate Transparency Act (CTA) aims to combat money laundering, tax evasion, and other illicit activities by requiring certain business entities to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
For real estate investors, especially those who hold property through LLCs or partnerships, this law carries important new obligations.
What Is the Corporate Transparency Act?
The Corporate Transparency Act, enacted as part of the National Defense Authorization Act, establishes a federal database of beneficial ownership information maintained by FinCEN — a bureau of the U.S. Department of the Treasury.
Under this law, many entities must file a Beneficial Ownership Information (BOI) report that discloses details about the individuals who ultimately own or control the company.
Who Needs to File a BOI Report?
The filing requirement primarily applies to “reporting companies”, which include:
Domestic entities (LLCs, corporations, or similar entities) created by filing a document with a state or tribal office.
Foreign entities registered to do business in the U.S.
If you’ve formed an LLC or corporation to hold investment property — even a single real estate asset — you’ll likely fall under this category.
Who Is a Beneficial Owner?
A beneficial owner is any individual who:
Owns or controls at least 25% of the ownership interests in the entity, or
Exercises substantial control over the company (for example, managers, decision-makers, or senior officers).
Each beneficial owner must have their information disclosed in the BOI report, including:
Full legal name
Date of birth
Residential address
A unique identifying number (e.g., driver’s license or passport number)
When Are Filings Due?
Existing companies (created before January 1, 2024): Must file their BOI report by January 1, 2025.
New entities (created in 2024): Have 90 days from formation to file.
Entities formed in 2025 or later: Will have 30 days from formation to submit their report.
Failure to meet these deadlines can result in significant penalties, including civil fines of up to $500 per day and potential criminal charges for willful violations.
Who Is Exempt from Reporting?
The CTA includes 23 categories of exempt entities, generally those already subject to substantial federal or state regulation. Examples include:
Banks and credit unions
SEC-registered entities
Insurance companies
Tax-exempt nonprofits
Large operating companies (with more than 20 full-time U.S. employees and over $5 million in annual revenue)
However, most small LLCs and real estate holding companies are not exempt.
Why Real Estate Investors Should Pay Attention
Many real estate investors use LLCs or limited partnerships to hold properties for liability protection or tax planning. Under the CTA, each of these entities will likely have to report their beneficial ownership to FinCEN.
For investors involved in multiple entities or joint ventures, keeping track of ownership changes and ensuring timely filing will be essential to avoid penalties. Additionally, since 1031 Exchange properties are often held in newly formed entities, understanding filing deadlines for those structures is especially important.
What Information Needs to Be Updated
If your entity’s beneficial ownership changes — such as selling shares, restructuring, or changing managers — you must file an updated report within 30 days of the change.
This ongoing requirement means real estate investors must maintain accurate internal records and monitor ownership adjustments carefully.
How to Stay Compliant
To comply with the Corporate Transparency Act, investors should:
Identify all reporting entities in their portfolio.
Determine beneficial owners based on ownership and control.
Gather required identification documents for each owner.
Submit the BOI report to FinCEN using the official BOI filing system.
Update reports promptly whenever ownership or control changes.
Proactive recordkeeping can make compliance much easier, especially if you manage multiple investment entities.
Transparency Meets Strategy
The Corporate Transparency Act represents a significant shift toward financial transparency in U.S. business ownership. For real estate investors, it’s less about tax strategy and more about compliance and preparedness.
By understanding the new rules, gathering ownership information early, and staying current with filings, investors can avoid costly penalties and maintain smooth operations across their real estate portfolio.
Disclaimer
This article is for informational purposes only and does not constitute legal, tax, or compliance advice. Investors should consult with a qualified attorney, CPA, or compliance professional to ensure they meet FinCEN and IRS requirements under the Corporate Transparency Act.
