New Reporting Requirement for Real Estate Businesses

In an ongoing effort to enhance transparency and combat financial crimes such as money laundering and terrorist financing, the Financial Crimes Enforcement Network (FinCEN) has implemented new regulations regarding Beneficial Ownership Information (BOI). These regulations require certain companies to file a BOI report, providing detailed information about their beneficial owners. Understanding these requirements is crucial for businesses to ensure compliance and maintain integrity in the financial system.

Who Must File a BOI Report?

The new BOI reporting requirements apply to certain types of companies, including corporations, limited liability companies (LLCs), and other similar entities that are formed or registered under state or tribal law in the United States. Some companies are exempt, such as publicly traded companies and large operating companies (more than 20 full time employees and more than $5 million in gross receipts).  Please note that agents do not typically count as full time employees, since they are commonly classified as independent contractors.  Most real estate brokerages will be required to file a BOI report.

What Details Must Be Included?

When filing a BOI report, reporting companies are required to disclose specific information about their beneficial owners. This includes identifying details such as the full legal name, date of birth, address, and a unique identifying number, such as a Social Security number or passport number, for each beneficial owner. Additionally, reporting companies must provide a description of the ownership interest held by each beneficial owner and certify the accuracy of the information provided.

Who Is Considered a Beneficial Owner?

According to FinCEN’s regulations, a beneficial owner is any individual who directly or indirectly owns or controls 25% or more of the equity interests in a company, or exercises significant control over the company. This definition encompasses individuals who have a substantial influence over corporate decision-making or who derive significant economic benefits from the company’s activities.

How to File the Report:

Filing a BOI report with FinCEN involves several steps. Reporting companies must first register with FinCEN’s secure online portal and create an account. Once registered, they can access the BOI reporting form and enter the required information about their beneficial owners. It’s essential to ensure the accuracy and completeness of the information provided to avoid potential penalties for non-compliance.

Filing Deadline:

The deadline to file the BOI report is based on when your entity was formed.  If your business was registered before January 1, 2024, you will have until January 1, 2025 to file the initial report. If the business was registered on or after January 1, 2024 and before January 1, 2025, you will have 90 calendar days to file its initial report.  Businesses registered on or after January 1, 2025 will have 30 calendar  days to file the initial report with FinCEN.

If you fail to file the BOI report or provide fraudulent information, you could face fines of $500 per day up to a maximum of $10,000 and two years in prison.

Conclusion:

The new beneficial ownership information (BOI) reporting requirements mandated by FinCEN represent a significant step forward in the fight against financial crimes. By requiring companies to disclose detailed information about their beneficial owners, these regulations aim to increase transparency and accountability in the corporate sector. Understanding who must file a BOI report, what information must be included, and how to file the report is essential for businesses to remain compliant with regulatory obligations and contribute to a more secure financial system.

This article contains basic information about filing requirements and we recommend contacting your attorney or accountant for more details.