The “Corporate Transparency Act” that was signed into law on January 1, 2021 has as one of its key provisions the elimination of anonymous ownership of properties through Limited Liability Corporations (LLCs).
The new law aims to make it harder to use real estate purchases for money laundering by forcing the real people behind these shell companies to disclose their identities.
LLCs have legitimate functions in real estate ownership, such as shielding owners from nuisance liabilities such as slip-and-fall claims and simplified tax accounting. The laws authors, including Sen. Marco Rubio of Florida, maintain that allowing owners to remain anonymous encouraged Ponzi schemes and rewarded criminals by providing them an easy place to stash their cash.
Certainly there are owners who are otherwise law-abiding citizens that may have chosen to form anonymous shell companies to keep their true identities hidden, often out of concerns for personal privacy and to avoid direct interactions with tenants. However, even these well-intentioned actions are now against the law, with fines up to $10,000 and up to 2 years in prison for willful violations.
If your real estate LLC is currently anonymous, it will need to disclose “who is the real, natural person (aka beneficial owner) who owns and controls an entity at the point of formation,” and to keep that ownership information updated in a federal database maintained by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The FinCEN database will be accessible to banks and law enforcement but not to the general public.