Navigating the New Corporate Transparency Act

If you’ve never heard of the Corporate Transparency Act (CTA), you’re not alone. While many real estate professionals are unaware of it, understanding this new law is crucial. The CTA went into effect on Jan. 1, 2024, and may require brokerages, team owners and agents who have a PA or PLLC to disclose ownership details to the federal government.

What does that mean? Well, the CTA was essentially enacted to enhance transparency in corporate ownership and prevent the illicit use of companies for criminal activities, such as money laundering and fraud. It aims to prevent businesses in the United States from being controlled by individuals from potentially adversarial countries that seek to influence or apply pressure through terrorist organizations.

Here’s how to stay in compliance:

1. Know what to submit.

Both domestic and foreign reporting companies are required to submit a Beneficial Ownership Information (BOI) Report (found here: fincen.gov/boi) to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) identifying all individuals who are associated with the reporting company. The purpose of the report is to determine who is part of your company, even if it’s just you as the sole Realtor®. The good news is that it’s free to file—and entities that existed prior to Jan. 1, 2024, have until Dec. 31, 2024, to file their BOI Report.

2. Determine who must file.

People often believe the CTA doesn’t apply to them because they run a small business or haven’t used a company in a long time. But even shelf companies—inactive businesses that are held for future use—are subject to the law unless they meet an exemption. Most exemptions apply to industries that are already heavily regulated, such as insurance, financial advisory, banking and those with revenues over $5 million and 20 employees. Realtors must also be mindful of any companies they set up to manage or own rental properties.

3. Understand beneficial ownership.

Beneficial ownership can include future interest, such as inheriting property. Even if you’re not the legal owner, you might have voting rights, a profit share or decision-making influence. The concept of beneficial ownership covers those who have control or benefits from a company without being listed as legal title owners, which the IRS and other entities already track.

4. DBAs don’t bypass accountability.

You must also report any fictitious names like DBAs. This doesn’t affect Realtors® in their PA/PLLC per se, but it can impact teams or brokerages. If you have a team LLC and add a DBA, for example, you absolutely must report it on the BOI Report.

5. Report business and life changes.

Once you file, no annual update is required unless changes occur. Changes must be reported within 30 days and include: change of address, marriage with accompanying name change and changes in management, such as adding officers or family members to the company. If you file but never have changes, you never have to file an update.

6. Be mindful of deadlines.

Entities created before Jan. 1, 2024, are required to file a BOI Report by Dec. 31, 2024. If you formed your company before Jan. 1, 2025, you have 90 days in which to comply. If your company starts on or after Jan. 1, 2025, you will only have 30 days to file that initial report. The federal government gave you a little bit longer this year because it’s a new requirement.

7. Beware of penalties.

Beneficial owners and company applicants who fail to timely file a BOI Report or those who submit incomplete, false, misleading or fraudulent information can face civil fines of $500 per day (up to $10,000) as well as up to two years in prison per occurrence. It could even be a felony. The issue with the penalty is that it applies not only to intentional wrongdoing but also to mistakes and oversights. So, even if you simply make a mistake or file inaccurately, you’re subject to the same penalty.

About 90% of my clients have never heard of the CTA, and the few who are aware mistakenly believe that filing their entity’s annual report with the Florida Department of State, which keeps their LLC active, is sufficient. However, this compliance is unrelated to any filings on Sunbiz.org

If you’ve only filed on Sunbiz, you haven’t complied with the CTA.

The CTA is comparable to the Transportation Security Administration (TSA) patting down 80-year-old ladies at the airport. These individuals are unlikely the ones funding terrorism or laundering money; this is Main Street USA after all. Nevertheless, the law was written broadly and applies to millions of small businesses across the country. Is it flawed? Perhaps, but only the Supreme Court can decide its constitutionality. The National Small Business Association (NSBA) filed a lawsuit challenging the CTA, resulting in a federal district court in Alabama ruling it unconstitutional and beyond Congress’s enumerated powers on March 1, 2024. However, this ruling only applies to the 60 plaintiffs in that case. Real estate business owners in Florida are still required to file. 

Jo Ann Koontz is principal attorney at Koontz & Associates, PL, in Sarasota, where she practices in the areas of residential and commercial real estate transactions, business law and taxation.