Navigating Transparency, Securing Success – Trust Kymn Harp for Expert Real Estate Compliance
The Corporate Transparency Act changed federal regulations for most privately held businesses on January 1, 2024. Though its title may suggest that it applies only to corporations, its reach is much broader. The Act additionally applies to limited liability companies, trusts, and others small business entities falling within the Act’s broad definition of “reporting company”. It is particularly significant for commercial real estate developers and investors because of their often complex and multi-level organizational structures. This new federal law was enacted to promote ownership transparency with the intent to minimize money laundering and other financial crimes. Kymn Harp, a commercial real estate legal specialist, sheds light on this legislation and the crucial steps businesses must take to comply.
The Corporate Transparency Act is enforced by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The Act mandates reporting companies disclose to FinCEN comprehensive information about its beneficial owners. “Beneficial owners” are people who own, directly or indirectly, at least 25% of the reporting company or who have substantial control. Senior officers, directors, and others with decision-making authority, and those who significantly influence major company decisions, are considered to have “substantial control.” This expansive definition ensures that reporting companies must provide comprehensive information to FinCEN about a broad range of owners and employees who share any significant part of directing company affairs.
Each reporting company must file a Beneficial Owner Information Report (BOI Report) with FinCEN to meet these requirements. The legal name, date of birth, current address, and acceptable forms of identification of each beneficial owner must be included in the BOI Report. Companies founded before January 1, 2024 must file by December 31, 2024. Companies formed after this date have shorter compliance deadlines, usually 30 to 90 days.
Kymn Harp underscores the necessity of adhering to these deadlines and suggests that, when in doubt, it is advisable to over-report rather than under-report to assure complete compliance. Failure to comply is a crime punishable by fines or imprisonment or both. Even if a company falling within the broad definition of “reporting company” is a subsidiary or affiliate of a larger company, it is required to separately submit to FinCEN a distinct BOI Report. A parent company or affiliate cannot file a single BOI Report covering its subsidiaries and affiliates. Each reporting company is legally required to complete and file its own BOI Report. The goal is to ensure maximum transparency while emphasizing individualized accountability.
Obtaining a FinCEN Identifier (FinCEN ID) is a practical way for beneficial owners and reporting companies to streamline the reporting process. Each beneficial owner can obtain a unique 12-digit identifier by filing an application and submitting all required identifying information with FinCEN. Rather than repeatedly submitting the same extensive personal information for each BOI Report, beneficial owners can instead submit their FinCEN ID, which is linked to their detailed identifying information in FinCEN’s secure database. This not only reduces redundancy but also aids in the protection of privacy and security. The FinCEN database is encrypted and engineered to be highly secure, with restricted access to ensure full protection of the personal identifying information of beneficial owners.
This is just one example of how Kymn Harp helps his commercial real estate and business clients. What he brings to the table is over 40 years of experience representing commercial real estate investors and developers as well as many privately owned businesses. He has represented clients in good times and bad – including through six recessions since he became a lawyer. “Each one is different”, he says, teaching valuable lessons helpful in the next. The worst, by far, was the Great Recession that officially ranged from December 2007 to June 2009 but impacted the commercial real estate industry for a decade. The next most severe is the commercial real estate recession brought on by the COVID-19 pandemic, with fallout that continues through today.
Harp’s seminal work, “Illinois Commercial Real Estate – Due Diligence to Closing, with Checklists,” was an update of his earlier publication, “Intent to Prosper.” The latter had an untimely publication date at the beginning of the Great Recession but served as an essential resource for investors and lawyers during the market’s recovery. The updated book reflects Harp’s dedication to offering practical advice in an increasingly complex marketplace – providing essential insights in the ever-changing field of commercial real estate.
All in all, Kymn Harp’s technical proficiency in the subject matter, and his willingness to share his knowledge with others, provides a useful guide for real estate practitioners in Illinois and throughout the country. His willingness to help others navigate the challenges of the Corporate Transparency Act provides just one more example. Harp never tires of sharing his historical perspective and invaluable guidance for both privately held businesses and commercial real estate professionals. His enduring tenacity in pursuing practical solutions to complex problems is his hallmark.