As 2024 brings new legislation across all levels of government, landlords must stay informed of the Corporate Transparency Act (CTA), a critical federal law impacting corporate entities such as LLCs and S-Corps. This law mandates that businesses submit detailed information about their ownership to the federal government. Failure to comply can result in steep penalties. If you're a landlord with rental properties under an LLC or corporation, this guide will help you understand the CTA and what steps you need to take.
Who Does the Corporate Transparency Act Apply To?
The Corporate Transparency Act applies to almost all corporations, limited liability companies (LLCs), and other similar entities created or registered to do business in the United States. The law requires these entities to disclose information about their beneficial owners, which includes anyone who directly or indirectly owns 25% or more of the entity or exercises substantial control over it.
However, there are exceptions to this rule. Large entities with over 20 employees, more than $5 million in gross receipts, and a physical office in the U.S. are exempt from reporting under the CTA. Additionally, certain entities like regulated investment companies and tax-exempt entities are also exempt.
How Do I Comply with the Corporate Transparency Act?
Complying with the CTA requires submitting a beneficial ownership report to the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury. This report must include:
Full legal names of all beneficial owners
Date of birth
Current residential or business address
An identification number from an acceptable government-issued document (such as a passport or driver's license)
If you’re forming a new entity, this report must be filed within 30 days of the entity’s creation. If your entity was created before January 1, 2024, the filing deadline is January 1, 2025.
Why Is the Corporate Transparency Act Important?
The purpose of the Corporate Transparency Act is to combat illegal activities such as money laundering, fraud, and terrorist financing. By requiring entities to disclose ownership details, the government can better track and prevent criminal activity involving corporate structures. For landlords, complying with the Act ensures transparency and protects against any potential misuse of their business entity.
Key Deadlines and Penalties
For newly formed entities, the beneficial ownership report must be submitted within 30 days of registration. Existing entities have until January 1, 2025, to submit their first report. Failure to comply with the CTA can lead to significant penalties, including fines of up to $500 per day for non-compliance and potential criminal charges for willful violations, leading to up to two years in prison.
Next Steps for Landlords
Landlords managing properties through an LLC or corporation should ensure they are fully compliant with the Corporate Transparency Act. Start by gathering all necessary documents and verifying your beneficial ownership structure. Attending industry meetings or webinars on the topic can help clarify the process, and seeking professional legal advice is highly recommended if you have any doubts about your reporting requirements.
In Conclusion
The Corporate Transparency Act may seem complex, but staying compliant is crucial for avoiding costly fines and penalties. Landlords operating under corporate entities must act swiftly to meet the reporting requirements and ensure that they’re in good standing with federal regulations. By understanding the steps involved and keeping track of key deadlines, landlords can protect their business and focus on growing their rental portfolios.
Make sure to stay updated with ongoing compliance requirements and attend industry meetings for more guidance. By preparing now, you can navigate the CTA with ease and ensure your business remains compliant in 2024 and beyond.
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