What Federal Penalties Can Businesses Face For Non-Compliance With The Corporate Transparency Act?

Federal Sanctions For Non-Adherence To The Corporate Transparency Act

As January 1, 2024 has come and gone, it is important to remember that the Corporate Transparency Act is in effect. The Corporate Transparency Act requires all businesses registered in the US to report information about their beneficial owners. Those that do not do so can face serious penalties!

It is essential that all businesses send in complete beneficial owner information as well as any other required information on time to avoid penalties. Some businesses may want to use a corporate transparency filing service to ensure they complete this new requirement accurately.

Corporate lawyer discussing with a client, emphasizing compliance with the Corporate Transparency Act

Overview Of The Corporate Transparency Act: Purpose & Requirements

In 2021, congress passed a law that requires businesses to report their ownership information to the Financial Crimes Enforcement Network which is part of the United States Department of the Treasury. There were several reasons for this law:

  • To Combat Illicit Activity: The CTA was enacted to address concerns about illicit activities such as money laundering, terrorism financing, and tax evasion.
  • Enhance Transparency: By requiring certain corporations and LLCs to disclose information about their beneficial owners, the CTA aims to increase transparency in corporate ownership structures.
  • Facilitate Law Enforcement: Access to accurate and up-to-date information on the individuals who ultimately control or benefit from these entities helps law enforcement agencies investigate and prosecute financial crimes more effectively.
  • Prevent Financial Abuse: The CTA seeks to prevent financial abuse and protect the integrity of the financial system by deterring criminals from using anonymous companies to conceal their illicit activities.
  • Align with International Standards: The enactment of the CTA brings the US closer to international standards for corporate transparency and anti-money laundering efforts, fostering cooperation and alignment with other jurisdictions in combating financial crime.

Who Needs To Comply? Business Requirements Under The Corporate Transparency Act

The Corporate Transparency Act affects every business registered in the United States, also known as reporting companies. There are a few exceptions to which businesses must report, but these exemptions are few and not likely to affect most companies. 

While small businesses will be affected the most, all businesses are required to report, including foreign entities doing business within the United States. Reporting companies include: 

      • S and C Corporations
      • LLCs
      • Limited Partnerships
      • Business Trusts

Consequences Of Non-Compliance: Penalties Under The Corporate Transparency Act

There are several penalties for not sending in your reporting company’s beneficial ownership information. The Financial Crimes Enforcement Network defines noncompliance as:

Noncompliance can result in several penalties that can be civil or criminal. Civil penalties will cause you up to a $500 per day fine for every day you do not file past your due date. In more serious cases, you can face up to two years in prison and/or a fine of up to $10,000! 

On top of civil and criminal penalties, it’s also possible to damage your company’s reputation by not complying which can impact future financing and other contracts. Contact Corporate Transparency filing services for help to avoid penalties and a damaged reputation. 

How To Ensure Compliance With The Corporate Transparency Act

There are several details reporting companies must keep in mind in order to avoid the serious penalties of noncompliance.

Understanding Who Is a Beneficial Owner

The first key to avoid penalties is to understand who the beneficial owner(s) of a company are. According to Financial Crimes Enforcement Network a beneficial owner is:

      • Someone who directly or indirectly owns or controls a significant portion of the company’s equity interests or voting rights.
      • Individuals who own 25% or more of the company’s equity interests, or those who exercise substantial control over the company through other means.
      • Those who have significant influence or control over the company’s management or operations, even if they do not meet the ownership threshold. 
      • Those who ultimately benefit from, or have the ability to influence or control the company’s activities or assets.

What Beneficial Owner Information Must be Reported?

According to the Corporate Transparency Act, reporting companies must provide a variety of information regarding their beneficial owners as well as information about themselves. In addition, if a company was created on or after January 1, 2024, company applicant information must also be given. A company applicant is the person who helped the company register with the US.

Reporting companies must submit the following information about themselves:

      • The legal name of the company
      • “Doing business as” names
      • Primary place of business address
      • Jurisdiction where company was registered
      • Taxpayer identification number
      • Employer identification number

Reporting companies must submit the following information about their beneficial owners and company applicants:

      • Legal full name
      • Birth date
      • Current address
      • Driver’s license number or other identification number
      • A picture of the identifying document

Important Corporate Transparency Act Dates To Know

The CTA officially went into effect January 1, 2024. Companies that existed prior to this date have a full year to file their initial report. If a company was created on January 1, 2024 or later, they will have 30 days to file from receiving official notice or when the secretary of state publishes a public notice, whichever one comes first. 

Complete Your Beneficial Ownership Information With Confidence With Our CTA Lawyers

At Corporate Transparency Act Filing Services, we specialize in navigating the complexities of CTA compliance, ensuring that your reporting requirements are met accurately and efficiently. With our expertise and dedication, you can trust us to guide you through the process, protect your interests, and ensure full compliance with CTA regulations. 

Contact us today to secure the legal support you need for your beneficial ownership obligations.


Corporate Transparency Act Filing Service

Corporate Transparency Act Filing Services
Email: lchapman@silverlawplc.com
Website: www.corporatetransparencylawyers.com

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