The Corporate Transparency Act (CTA) is a sweeping new law that requires certain new and existing corporations, limited liability companies (LLCs), and limited partnerships (LPs) to file beneficial ownership information (BOI) reports with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). As discussed in more detail in our article, Private Real Estate Investing and the Corporate Transparency Act – What Sponsors Need to Know, real estate investment companies and other sponsors of real estate investments (Sponsors) often utilize several LLCs and LPs to structure a single real estate investment and may have many ongoing real estate investments in their portfolio. For this reason, Sponsors often have a significant number of LLCs and LPs under their control and may be particularly burdened by the January 1, 2025 deadline to file BOI reports for their pre-2024 entities. Sponsors should, therefore, consider assessing their obligations under the CTA early to ensure they have time to gather any necessary information and complete applicable BOI reports by the applicable deadline.

The key points on the issue are summarized below. A copy of the full article on the topic and all of Hanson Bridgett's articles on the topic can be obtained here.

Key Points:

• The CTA requires all corporations, LLCs, and LPs to file BOI reports unless a specified exemption applies. BOI reports for non-exempt entities formed prior to January 1, 2024, (Pre-2024 Entities) must be filed by January 1, 2025.
• Sponsors with multiple real estate investments may have a considerable number of LLCs and LPs under their control because of the common use of these entities as joint ventures, funds, special purpose vehicles and other ownership entities, management entities, and advisory entities, etc. Any of these entities formed prior to January 1, 2024, will be required to file a BOI report on or before January 1, 2025, unless the entity can qualify for one of the statutory exemptions available under the CTA.
• Sponsor entities will likely not be exempt if they are not: (1) public companies required to file certain reports with the Securities & Exchange Commission (SEC); (2) registered with the SEC as investment advisors under the Investment Advisors Act of 1940 (Advisors Act); (3) a "pooled investment vehicle" advised by an investment advisor registered with the SEC under the Advisors Act; or (4) a subsidiary whose ownership interests are "controlled or wholly owned" by a public company or a registered investment advisor. It is important to note that only entities registered with the SEC or advised by entities registered with the SEC are exempt under exemptions described in (2) or (3) hereof. These exemptions do not extend to entities that meet the definition of an "investment advisor" under the Advisors Act (including general partners and managers of pooled funds) but rely on the "exempt reporting advisor" exemption from registration, nor do they extend to entities that are registered as investment advisors under state law rather than being registered with the SEC.
• BOI reports for non-exempt entities must be filed with FinCEN and must include identification information for the entity as well as identification information (including some form of photo I.D.) for each of its "beneficial owners." For this purpose, includes both: (1) individuals that have substantial control over the entity (including senior officers and potentially equity owners with significant control rights); and (2) any individuals that directly or indirectly own at least 25% of the entity's ownership interests (whether or not such individuals have control rights).
• Prior to January 1, 2025, Sponsors will need to: (1) assess their reporting obligations under the CTA with respect to each of their pre-2024 entities; (2) gather all information needed for completing each applicable BOI report, including obtaining all information and photo I.D.s from applicable control persons and "beneficial owners" (including any investors or joint venture partners that own more than 25% of an entity's ownership interests or were otherwise deemed to be control persons); and (3) complete and file each required BOI report.
• BOI reports for Pre-2024 Entities are only required if the entity is in existence on January 1, 2025. Sponsors may also want to determine whether they have older outstanding entities that are no longer actively utilized. If so, terminating those entities prior to January 1, 2025, is a simple way to avoid any CTA obligations with respect thereto.

Sponsors should also be aware that BOI reports for all non-exempt entities formed after January 1, 2024, must now be filed within 90 days of formation. Limited partnership agreements and LLC agreements for newly formed entities should, therefore, contemplate the possible reporting obligations of the Sponsor for the entity under the CTA.