Congress passed the Corporate Transparency Act on January 1, 2021. As mentioned in Part 1: “The Good” and Part 2: “The Bad”, it can be unclear whether you have a duty to provide a Beneficial Ownership Information report, and what (or who) all needs to be included in it. Unfortunately, this is not something any business owner would want to learn by trial and error, as the penalties under the Act can be ugly and punitive. Failure to Report could cost $500/day and time in prison.
Recall these requirements are retroactive and include businesses that are already in existence. Businesses created on or before January 1, 2024, must submit the Beneficial Ownership Information by January 1, 2025. Any businesses created after January 1, 2024, have only 30 days to submit their report.
The Corporate Transparency Act provides it is unlawful to provide false or fraudulent information on a Beneficial Ownership Information report or to fail to report complete or updated Beneficial Ownership Information. If a Reporting Company fails to provide a report, the person who causes the failure to report and any senior officers of the Reporting Company are deemed to have violated the Act.
Penalties
There are significant penalties under the Corporate Transparency Act for Reporting Companies who fail to meet their obligations. A person who violates the Act may face civil and/or criminal penalties. The civil penalty for violating the Act is a $500 penalty per day the violation continues or has not been resolved. For example, a senior officer of a Reporting Company may face a $10,000 civil penalty if a Beneficial Ownership Information report is submitted 20 days late.
The criminal penalties for violating the act are a fine up to $10,000 and up to 2 years in prison.
The entity also loses its ability to lawfully operate and engage in business!
Safe Harbor
There is a safe harbor for anyone who accidentally submits an inaccurate Beneficial Ownership Information report if the person submits a report containing complete Beneficial Ownership Information no more than 90 days after the inaccurate report was submitted.
This safe harbor does not apply for anyone who knowingly submitted false information to evade the reporting requirements. From the way the safe harbor is written, it also appears the safe harbor is not available for anyone who failed to submit a report or updated report by the statutory deadline.
We’re here to help you stay compliant with the Act and avoid the penalties. Contact us to schedule a conference with us to discuss how you may fulfill any reporting requirements you may have. Call us at 405-753-1504 to schedule today!
