The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has introduced a new federal law requiring all LLCs, corporations, and similar entities to report their beneficial ownership information. This new rule applies across the board, including entities holding real estate—a common structure for property ownership here in Newport Beach, Costa Mesa and throughout California, due to its liability and tax benefits. If you own real estate through an LLC, these new regulations are directly relevant to you.
Deadlines / What You Need to Know:
- Entities created before January 1, 2024, must file their reports by January 1, 2025.
- For entities formed on or after January 1, 2024, the filing deadline is 90 days after the entity is formed.
- For entities formed on or after January 1, 2025, the filing deadline is 30 days after the entity is formed.
This is a mandatory filing, and non-compliance can lead to significant penalties. The government will not send reminders, so this is your responsibility to address.
Here’s what needs to be reported:
- Entity name
- Employer Identification Number (EIN) or Social Security Number (SSN)
- Country and state of entity formation
- Entity address
- Beneficial owners’ personal information, including:
- Full legal name
- Date of birth
- Residential address
- Government-issued ID details (e.g., driver’s license or passport)
- A copy of the ID
You can file yourself through FinCEN’s BOI Filing System.
What If You Do Not Report?
Civil penalty. Any person who fails to comply with the registration requirements may be liable for a civil penalty of up to $5,000 for each violation. Failure to comply includes the filing of false or materially incomplete information. Each day a violation continues constitutes a separate violation. In addition, the Secretary of the Treasury may bring a civil action to enjoin the violation.
Criminal penalty. It is unlawful to do business without complying with the registration requirements. A criminal fine and/or imprisonment for up to 5 years may be imposed.
As noted, this is a mandatory filing, and non-compliance can lead to significant penalties.
Why?
This new reporting requirement is designed to assist in preventing crimes, i.e. money laundering, which frequently occurs via the purchase and sale of real estate and other assets owned by legal entities. It is unclear how this will be enforced and if criminals will register their entities, but as with all new regulations, law abiding entity owners must ensure compliance or risk significant penalties.
Special Considerations for Real Estate LLCs
- Entities Dissolved Before 2024
If your LLC was dissolved prior to January 1, 2024, you’re in luck: there’s no need to file. According to FinCEN’s guidance, entities that ceased to exist as legal entities before this date are exempt. However, the dissolution must have been formal and irrevocable, such as filing dissolution paperwork, paying taxes, and closing all accounts. - Name Changes
If your LLC’s name changed before January 1, 2024, use the current legal name for your filing. If a name change occurs after filing, you must submit an updated report with the new name and other required details. - No SSN or EIN
For LLC owners who don’t have a Social Security Number (SSN) or Employer Identification Number (EIN), FinCEN allows you to use a tax identification number issued by a foreign jurisdiction, along with the name of the issuing jurisdiction.
Why This Matters for Real Estate Owners
It’s very common to hold real estate investments in LLCs for liability protection, tax planning, and estate management. These benefits are invaluable, but they also mean your LLC is subject to this new federal reporting requirement. Whether you own a single rental property or a portfolio of investments, every LLC you hold must comply with this law.
How Lucas Real Estate Can Help
At Lucas Real Estate, we specialize in helping real estate owners navigate the complexities of property ownership, including holding real estate in LLCs. This new reporting requirement is just one of many challenges owners face, and we’re here to simplify the process for you. From guiding you through the FinCEN filing process to ensuring your LLCs remain compliant with all legal requirements, our expertise makes us your trusted partner in real estate.
If you’re unsure about how these requirements apply to your situation, reach out to us. We’ll provide clarity and help you protect your investments, allowing you to focus on what you do best—growing your real estate portfolio.
Have Questions?
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Lucas Real Estate provides a full range of residential real estate services, offering seamless integration of legal, tax, and real estate brokerage expertise. Based in Newport Beach, California, our team brings a unique edge to navigating the complexities of real estate transactions, planning, and compliance. Devin Lucas is a licensed California Real Estate Attorney, Broker, and REALTOR®, and Courtney Lucas is a California-licensed CPA and REALTOR®.
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Sources:
boiefiling.fincen.gov
https://boiefiling.fincen.gov/help
31 CFR 1022.380(e) (formerly 31 CFR 103.41(e)), 18 USC 1960
https://www.fincen.gov/penalties
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