Kansas City, USA

Most existing real estate entities in the US may not be exempt under the Corporate Transparency Act

By Anthony J. Soukenik, Sandberg Phoenix & von Gontard

The Corporate Transparency Act was adopted as part of the Defense Appropriations Act of 2021, Public Law 6-283 (01 January 1 2021). It requires entities which are not one of the twenty-three exemptions to register beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN). The effective deadline for existing entities is 31 December 2024.

It is unlikely that most real estate entities will meet one of the twenty- three exemptions. This is the perfect opportunity to re-examine your firm’s relationship with your real estate clients and to consider a host of compliance requirements. One of the twenty-three exemptions is large operating companies 31 C.F.R. § 1010.380(c)(2)(xx), which is defined as companies employing more than 20 employees on a full-time basis in the United States and with over USD 5 million in gross receipt or sales reported on a previous year federal income tax return.

Beneficial owners are defined as:

  • All individuals who own or control 25 percent or more of a reporting company, but also all individuals who hold the authority to cause the adoption of major corporate and operational decisions at a reporting company.
  • For purposes of this section, the term ‘‘beneficial owner”, with respect to a reporting company, means any individual who, directly or indirectly, either exercises substantial control over such reporting company, or owns or controls at least 25 percent of the ownership interests of such reporting company. 31 C.F.R. § 1010.380(d).
  • Direct or indirect ownership may include:
    (a) joint ownership of an undivided interest;
    (b) ownership through another individual acting as a nominee or similar intermediary;
    (c) ownership through a trust (including a trustee or a settlor or beneficiary of a trust if that individual holds the authority to direct certain activities of the trust); and
    (d) ownership through one or more intermediary entities. 31 C.F.R. § 1010.380(d)(2).

As our clients consider their beneficial ownership enrolment, this may be a good opportunity for clients to inform their insurance carrier agents to list those beneficial owners as additional insureds; review the Secretary of State records to ensure that annual filing requirements have been met; make sure that all organisational documents have been updated; and perhaps consider designating, where appropriate, succession planning (transfer on death clauses or registering the membership entity ownership interests in the client’s trust or other estate planning).

Anthony J. Soukenik

Anthony J. Soukenik

GGI member firm
Sandberg Phoenix & von Gontard, Saint Louis, MO, USA
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With more than 175 attorneys across seven offices, Sandberg Phoenix & von Gontard’s work is concentrated in the areas of business, business litigation, intangible property, health law and products liability. They stand behind their promise to provide superior client service with a rare client service guarantee, reflecting their commitment to quality and broad depth of legal expertise.

Anthony J. Soukenik is a Shareholder of Sandberg Phoenix & von Gontard and has previously served on the firm’s Executive Committee. Tony is a member of the Business Law Practice Group and a former Practice Group Leader. He focuses his practice on the areas of banking, construction, real estate, corporate law, durable medical equipment, estate planning, real estate, and federal and state taxation.

Published: Real Estate Newsletter, No. 16, Spring 2023 l Photo: SeanPavonePhoto - stock.adobe.com

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