The New Beneficial Ownership Report (BOI) Requirements and What It Means for Real Estate Investors

As part of the 2021 Corporate Transparency Act (CTA), many businesses in the U.S. will be obligated to provide the Financial Crimes Enforcement Network (FinCEN) with details regarding their beneficial ownership information (BOI) from the 1st of January 2024. 

What this essentially means is that from the 1st of January, companies (unless they qualify for one of the exemptions), whether that’s an LLC, S-Corp or other, will need to submit to FinCEN the details of the beneficial owners.

While there is no associated filing fee, failure to comply may result in significant civil and criminal penalties, potentially leading to imprisonment.

This recent obligation is fundamentally crafted to counteract money laundering and illicit financial activities.

We strongly advise reaching out to your legal representative for guidance in adhering to these filing requirements.

You can find out more with FinCEN’s Small Entity Compliance Guide which has updated FAQs that specifically address reporting obligations. 

What you need to know about the BOI reporting requirements

Who is a beneficial owner of my company?

A beneficial owner is any individual who, directly or indirectly: 

• Exercises substantial control over a reporting company; 

OR  

• Owns or controls at least 25 percent of the ownership interests of a reporting company.

Who needs to file a BOI report?

Every domestic and foreign entity established or registered for business operations in the United States is obligated to submit the BOI report unless they qualify for one or more of the 23 filing exceptions.

Domestic entities are any corporation, limited liability company, or other organizational structure established with the secretary of state or a comparable office, as stipulated by the laws of a U.S. state or Indian tribe.

Foreign entities refer to those established under the laws of a country outside the United States and duly registered to conduct business in any U.S. state or tribal jurisdiction.

What this means for real estate investors is that if you operate your real estate business under an LLC (or multiple LLC’s) you will need to file a BOI report (for each LLC) declaring to the IRS who the beneficial owners are. 

Related: How to Structure Your Real Estate Business Sole Proprietorship, Partnership, LLC, or S-Corporation?

There are 23 BOI exemptions:

1. Securities reporting issuer 
2. Governmental authority 
3. Bank 
4. Credit union 
5. Depository institution holding company 
6. Money services business 
7. Broker or dealer in securities 
8. Securities exchange or clearing agency 
9. Other Exchange Act registered entity
10. Investment company or investment adviser 1
11. Venture capital fund adviser 
12. Insurance company 
13. State-licensed insurance producer 
14. Commodity Exchange Act registered entity
15. Accounting firm P
16. public utility 
17. Financial market utility 
18. Pooled investment vehicle 
19. Tax-exempt entity 
20. Entity assisting a tax-exempt entity 
21. Large operating company 
22. Subsidiary of certain exempt entities 
23. Inactive entity

For more information on these exemptions read through the FinCEN BOI Small Entity Compliance Guide.

BOI filing due dates

The BOI reporting obligations will become effective on January 1, 2024, with varying filing deadlines outlined as follows:

1. New Companies (Established/Registered after December 31, 2023): Submit within 90 days of formation. A recently issued Notice of Proposed Rule making extends this deadline to 90 days from the original 30-day window, exclusively for reporting entities established or registered in 2024.
2. Entities Created or Registered on or after January 1, 2025: No change to the rule; a BOI report must be filed within 30 days of formation.
3. Existing Companies (Established/Registered before January 1, 2024): File by January 1, 2025.
4. Companies with Changes to Previously Reported Information (e.g., ownership, address, etc.): Submit within 30 days of the change or the discovery of any inaccuracies.

Penalties for failure to file the BOI report

The BOI reporting regime carries potential civil and criminal penalties:

• Civil penalties for a violation are up to $500 per day, or
• Criminal penalties of up to 2 years of imprisonment and/or a fine up to $10,000

Information required to report for new BOI requirements

Each company must report the following entity-related information:

• Legal name of the reporting entity, as well as any trade or “doing business as” names
• Business address
• State or tribal jurisdiction of formation
• IRS taxpayer identification number

Each company must also disclose details about the beneficial owners of the entity, such as name, birthdate, address, and an image of a document with a unique identifying number (i.e., a non-expired U.S. passport or state driver’s license).

The time to file these returns will come sooner than you think. We recommend that you reach out to your legal representative as soon as possible to ensure timely compliance.

Where can you find the form to report?

The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted on FinCEN’s beneficial ownership information webpage.

Final Words: BOI Report and Real Estate

The Beneficial Ownership Information (BOI) report impacts real estate investors who have opted to form a company for their investments, such as an LLC. This is just one more compliance requirement that investors need to be aware of - but underscores the importance of staying on top of regulatory changes and obligations. 

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