by Zach Javdan
November 10, 2021
Since significant penalties are associated with willful noncompliance with the Corporate Transparency Act, it is important to comply if you have an existing corporation or LLC in the United States.
Compliance is also essential when forming a new corporation or LLC.
Keep the Corporate Transparency Act penalties in mind at all times.
What is the Corporate Transparency Act (CTA)?
The CTA, which was enacted on January 1, 2021, is a historic new law impacting millions of America’s existing small corporations and LLCs.
It requires newly formed corporations to provide personal ownership information to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Existing corporations must provide ownership information within two years of the law going into effect.
What is the Purpose of the Corporate Transparency Act?
The purpose of the law is to prevent the use of corporations and LLCs to perpetuate activities like tax evasion, money laundering, tax evasion, cyber crime and terrorism.
The enumerated goals of the CTA are clear incorporation standards, protection of national security, protection of commerce, countering illicit activities and establishing compliance standards.
When does the CTA go into Effect?
The law was originally slated to go into effect by January 1, 2022. Recent developments indicate that this date might be delayed.
Corporate Transparency Act Penalties
CTA penalties vary based on whether the violation was willful or negligent.
What are the Corporate Transparency Act Penalties for Willful Violation?
Substantial penalties apply to willful violations.
Civil Penalties: Willfully failing to comply, or providing fraudulent or false information, can result in a $500 per day penalty (up to $10,000).
Criminal Penalties: Willful violators also face up to two years in prison.
What Penalties Apply to a Negligent Violation?
Civil Penalties: No civil penalties apply to negligent violations.
Criminal Penalties: No criminal penalties apply to negligent violations.
Safe Harbor Rules: Safe harbor rules apply to individuals who provide inaccurate information as long as the they (a) did not know about the inaccuracy, (b) were not attempting to evade reporting requirements, and (c) correct any inaccurately reported information “voluntarily and promptly,” but not more than 90 days after submission.
What Corporate Transparency Act Penalties Apply to Misuse of Information Collected
Additional penalties, including criminal fines up to $250,000 and up to five years of imprisonment, apply to misuse of collected information.
Conclusion on Corporate Transparency Act Penalties
A lot is at risk for those not taking this new law seriously.
If you have an existing corporation or LLC, or plan to form a new one, be sure to consult with an attorney as soon as possible.