A new government reporting requirement will impact a majority of small-business owners, including those in the self-storage industry. Learn about the Corporate Transparency Act, what it means for your company and how to ensure you’re compliant.

Jed Burton

March 6, 2024

4 Min Read

Business owners don’t usually get enthusiastic about federal reporting requirements, so to many of you, this may come as bad news: There’s a new one in 2024. On Jan. 1, the Corporate Transparency Act (CTA) went into effect. Under this landmark legislation, most small businesses are now required to file an annual report with the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN).

While the CTA isn’t exclusive to the self-storage industry, it will affect many operations, particularly smaller, independent ones. Let’s explore what this means for you as an owner or investor.

A Critical Overview

Enacted in 2021, the CTA is intended to aid law enforcement in combating illicit or illegal activity conducted through anonymous shell companies. As a requirement, it compels certain privately held business entities to report “beneficial owner information” (BOI) to FinCEN once per year or any time there’s a significant change. Here are a few important things you should know about the legislation and its verbiage:

Reporting company. This is any business entity required to submit BOI reports under the CTA. The category includes domestic and foreign corporations, limited-liability companies and other entities created by filing a document with a secretary of state, a division of corporation or similar office, and Indian tribes.

Beneficial owner. This is any individual who directly or indirectly exercises substantial control over the reporting company (this includes most senior officers), or owns or controls 25% or more of the ownership interests.

Exemptions. The CTA outlines 23 specific categories of entities that are excluded from the definition of reporting companies. These include, for example:

  • Larger, highly regulated companies that are publicly traded

  • Federally registered investments or advisers

  • Certain tax-exempt entities

  • Highly regulated entities like banks, securities broker-dealers and public utilities

For more guidance on exemptions, refer to FinCEN’s Small Entity Compliance Guide and FAQs, both found at fincen.gov.

Company applicants. For reporting companies created or registered on or after Jan. 1, 2024, only company applicants must be identified in the CTA report. An applicant is an individual who creates a domestic reporting company or first registers a foreign company to do business in the United States, or who’s primarily responsible for directing or controlling the filing of the documents providing for the company’s formation or registration. Up to two individuals can qualify as company applicants.

Inclusions. Reporting companies must provide detailed information in their CTA filing, including legal names, trade names, addresses, a unique identifying number (with image evidence such as a passport or a driver’s license), and the company’s taxpayer-identification number, including an employer-identification number.

Filing timeline. If your reporting company already existed when the CTA when into effect on Jan. 1, you must file your initial BOI report by Jan. 1, 2025. If it was created after Jan. 1 of this year, you have until 30 days after its creation or registration to file; however, FinCEN is considering an extension to 90 days.

Your CTA reports must also be updated within 30 days of any change in beneficial ownership. This might be due to a company sale, merger, acquisition or death of a principal, for example. Additionally, reporting companies are obligated to update their information within 30 days upon becoming aware of or even having reason to suspect an inaccuracy in previously filed information. My advice is to try to get it right the first time, and remember: Timely updates and corrections are crucial to compliance.

Compliance. Owners of reporting companies must proactively initiate their own compliance measures. For example, your internal program should include triggers for timely report updates when necessary due to changes in a company’s governance or ownership.

There are civil and criminal penalties for any person willfully providing (or attempting to provide) false or fraudulent BOI, or failing to report complete or updated BOI. These can include fines of up to $10,000, imprisonment of up to two years or both. Translation: Don’t ignore the requirement, regardless of what you may think about it.

Also, If you’re acquiring a new self-storage facility by means of an entity purchase, be sure to supplement your traditional due diligence with a review of the target’s CTA compliance history.

If you’re concerned about CTA compliance or don’t have the staff or infrastructure to establish it, consult your legal counsel or other advisers for assistance. In fact, I wouldn’t be surprised to see a cottage industry grow around this effort. You can also refer back to the FinCEN guide and FAQs referenced above.

Be Prepared

As an industry encompassing many small, independent operators, self-storage it is significantly impacted by the CTA. As the legislation ushers in a new era of transparency and accountability, owners and investors must prepare for a new set of reporting obligations. By proactively addressing compliance, conducting appropriate due diligence in acquisitions and working with the right team, you can position yourself for success in an evolving regulatory landscape.

Jed Burton, a commercial real estate lawyer and advisor for Buchalter, closes business-critical deals for clients with real property investments nationwide. With the perspective of former in-house counsel, he steers, structures and negotiates acquisitions, dispositions, ground and commercial leases, and real estate financing transactions for self-storage owners and investors nationwide. To reach him, call 801.520.0634 or email [email protected].

About the Author(s)

Jed Burton

Jed Burton, a commercial real estate lawyer and advisor for Buchalter, closes business-critical deals for clients with real property investments nationwide. With the perspective of former in-house counsel, he steers, structures and negotiates acquisitions, dispositions, ground and commercial leases, and real estate financing transactions for self-storage owners and investors nationwide. To reach him, call 801.520.0634 or email [email protected].

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