January 17, 2024
The Corporate Transparency Act (CTA) was passed in 2021 but goes into effect in 2024. It signifies a pivotal shift in the regulatory landscape, bringing about heightened transparency in corporate structures and operations within the United States. For commercial real estate investors, understanding the purpose and significance of the CTA is paramount, as it may directly impact business operations. Purpose of the CTA: Combating Illegal Activities The CTA aims to identify those who are behind the veil of US businesses and real estate ownership in an effort to tackle money laundering, potential terrorist activity, and other illicit activities. Strengthening Accountability & Integrity The government hasn’t historically had a good way to track the individuals behind large corporations and company names. CTA bolsters corporate governance by promoting accountability and integrity within business structures by requiring that all businesses disclose all “beneficial owners.”. There are exceptions for some large companies, SE-registered advisors, pooled funds, etc., but most corporations, LLCs and other similar entities that are established solely for the ownership of real estate will be required to meet these new requirements. Enhanced Compliance Compliance with CTA requirements is essential for businesses, including entities that exist for the sole purpose of owing real estate, to avoid penalties. Understanding reporting deadlines and accurately submitting beneficial ownership information to FinCEN.gov is crucial. The reporting deadlines of reporting companies vary depending on the business’s formation date, so it is important to familiarize yourself with the nuances set forth to avoid the potential penalties established by the U.S. Treasury. LLC’s that are not in compliance with the CTA may face a fine of $500 per day per LLC or a 2-year prison sentence . Key Dates for Investors to Remember