The Connecticut Secretary of the State and Attorney General Offices joined efforts during 2011 which resulted in the collection of more than $1.3 million in fines from out-of-state companies operating in Connecticut without legal authority to transact business.
Under state law, business corporations, nonstock corporations, limited partnerships, limited liability companies, limited liability partnerships, and statutory trusts formed outside of Connecticut must obtain a certificate of authority to transact business in Connecticut by registering with the Secretary of the State's Office and paying the statutorily established fee. Connecticut's definition of "transacting business" in the state includes activities ranging from maintaining an office to having point of sale take place in the state.
More than 50,000 foreign entities have properly filed with the Secretary of the State's Office and paid a registration fee of approximately $300 per year.
Companies that violate the law face a fine of $300 for every month the company is transacting business in Connecticut without legal authority. In addition, some companies are required to pay the annual license fee required by statute for years they should have been registered with the Secretary of the State's office.
Both offices recognize that many companies fined simply didn't know about the requirement. However, since registering ensures that companies operating in Connecticut can be held accountable to consumers, fines were issued and collected. Further, each of the companies that paid a penalty, continues to transact business in Connecticut and is now in full compliance with the law. Fines and penalties collected from businesses fined in 2011 range from $40.00 to more than $27,000.
The Secretary of State and the Attorney General are sending a clear message to any company thinking of operating illegally in Connecticut. Fines will be issued and business names will be publicized for those entities trying to skirt the law. The state has issued a zero tolerance for business practices that take advantage of Connecticut consumers and those businesses not following rules.
A special thanks to article contributor Paul Graney, Partner, Tax & Business Services.