Important update as of December 12, 2024
A nationwide court order has temporarily put a hold on the requirement for businesses to report Beneficial Ownership Information (BOI) under the Corporate Transparency Act (CTA). This pause gives businesses a temporary break from the reporting requirements discussed in this article. However, the court decision may be temporary, and the reporting rules could be reinstated at any time.
Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency Coalition, is telling businesses they should still file their information. “The deadline itself hasn’t changed. It just changes enforcement of the law,” she said.
What follows is our article in its original form. It contains important information about the BOI reporting law, relevant dates and actions you may need to take in the near future.
What is the Corporate Transparency Act?
The CTA is changing the way businesses handle beneficial ownership reporting. The end of the first reporting deadline is January 1, 2025 (applicable to businesses formed before January 1, 2024). By that time, property management business owners should be ready to go.
If you’d like to get started filing right away, you can use the BOI E-Filing System or check out these FinCEN small business resources.
Of course, you’re not alone in this journey. To get you the best information possible, we spoke to Joe Riter, senior manager of public policy at the National Apartment Association’s (NAA) Government Affairs department.
“Most people wouldn’t know about this law unless they’re tracking updates in the Federal Register, which most small businesses don’t do. Our role is to help ensure NAA members are informed and aware of their responsibilities,” said Joe.
As things stand today, the CTA is being challenged in court. This article covers where that leaves you and what you can do to avoid penalties.
The bottom line: protect yourself from costly penalties by ensuring compliance with the Corporate Transparency Act and FinCEN’s BOI reporting requirements. For businesses formed before January 1, 2024, compliance will ensure you avoid fines of $591 per violation per day (subject to inflation).
How the CTA works
Starting January 1, 2024, most businesses must disclose information about their BOI to the Financial Crimes Enforcement Network (FinCEN). The goal of the law is to combat illegal activities such as money laundering, terrorist activity, tax evasion, etc.
Why the CTA was created
According to Joe, “The Corporate Transparency Act was designed to combat money laundering and transnational crime. The aim is to prevent criminal organizations from using small business structures to ‘park’ money in assets that can quickly be liquidated.”
The CTA aims to increase transparency by requiring businesses to report details about their beneficial owners. Beneficial owners are individuals who own or control at least 25% of a company or have significant influence over its operations. Reporting requirements include personal information such as names, birth dates and residential addresses.
If your business was formed before January 1, 2024, you’ll have until January 1, 2025, to submit this information. Companies formed after January 1, 2024, must report within 90 days of formation.
Why compliance can be tricky
Many property management businesses have complex ownership structures that can make reporting tricky. Non-compliance may lead to steep penalties, including fines and criminal liability.
In fact, businesses that do not file updated ownership information by January 1, 2025, will be subject to $500 per violation per day, adjusted for inflation. As we write this article, that’s up to $591 per day. For companies with multiple LLCs, those penalties can multiply.
For property management companies, these rules aren’t just about avoiding penalties — they’re about accountability. To uphold industry trust and transparency, it matters that your business takes steps to be in line with federal regulations.
3 steps property management companies can take
To navigate the new BOI rules with a little more clarity, consider the following:
- Most multifamily properties fall under the rules. Review your business structures to determine if you’re required to file under the CTA. Some entities, such as large operating companies, are typically exempt because they already meet federal disclosure requirements under other laws.
- Gather the necessary details about beneficial owners now. This includes full legal name, date of birth, addresses and identification information.
- Smaller operators might need to hire legal counsel. It can be expensive, but legal professionals can guide you through any questions or complexities. At the end of the day, they’re going to keep you out of trouble, so it’s worth the cost.
How long does it take to report ownership information?
So, how much time is this going to take you? According to Joe, “It depends.”
And that’s exactly why property management companies need to get on top of it sooner rather than later.
Joe told us that for companies with an organized corporate structure and someone dedicated to handling compliance, the process might only take 20 minutes. For smaller independent rental owners, gathering the necessary documentation could take hours or even days.
What if someone isn’t sure what to do next?
Joe is clear on this point. He told us, “If someone is concerned about meeting the deadline, they should immediately contact whoever manages their business affairs — whether that’s a business manager or an attorney — and ensure they’re taking steps to stay compliant.”
Legal developments
At the time of this article’s publication, the CTA is under legal consideration. The Northern District of Alabama ruled the law unconstitutional, but the government’s appeal is still ongoing. The future of the Corporate Transparency Act may someday be decided by the Supreme Court of the United States. Even so, that could be years away.
As of March 1, 2024, most companies must comply with the new BOI reporting regulations. Members of the National Small Business Association are exempt, as are a few others.
How NAA can help property management companies
The National Apartment Association (NAA) offers BOI guidance to help property management companies understand and comply with these changes.
Watch this NAA video for a detailed breakdown of the law.
Disclaimer
As senior manager of public policy with NAA, Joe Riter analyzes and comments on federal, state and local regulations that impact the rental housing industry, and helps support state and local affiliates by monitoring trends and providing resources.
We hope you enjoyed this post, which is for general information purposes only. The opinions, analysis and commentary expressed are not and cannot be relied on as legal advice, and do not necessarily reflect the views of Yardi Systems, Inc. or any of its affiliates. Be sure to consult with a qualified legal or compliance professional when navigating the CTA and any other legal and regulatory requirements that may pertain to you or your business.
