The end of the year is an important time to review your company’s business compliance and legal standing to assure that your business is in compliance with all legal requirements and are ready to take on the new year.
A corporation or LLC formalizes your small business and protects your personal assets. However, to obtain these benefits you must maintain the corporation or LLC and it is more involved than a sole proprietorship.
Here is a year-end checklist of things that may need to be done to keep your business entity in “good standing”:
File Your Annual Report: Most jurisdiction’s require filing an Annual Report or Statement of Information.
Pay Your State Franchise Taxes: Some States, including California, levy a franchise tax on corporations and LLCs for the privilege of operating in the state. Check with your state’s Franchise Tax Board (or similar office) if you do not know your franchise tax obligations.
Advise The State Of Major Changes: If you have made, or contemplate making, major changes in the nature, direction or management of your business you need to file an official notification (Amendment to the Articles) Changes that could trigger such filings include: changing your business address, changes to board
members, changing the company name, modifying the manner in which company ownership is represented, changes in the manner of business entity governance, etc.
Assure Your Registered Agent is Current: LLCs and corporations must file an official address for service of papers and process. Some companies use a Registered Agent service as their official address if they don’t have a permanent office location. If you use a Registered Agent service make sure you keep up with your service fees or the Registered Agent will stop representing you, official mail from the state will be returned, and the state will list your company as in bad standing until it receives an updated address of record.
Register DBAs: If you conduct business under a name that’s different than the filed official name of your LLC or corporation, in California you need to file a Fictitious Business Name Statement for each variation in each County where the company does business under such fictitious business name other than the
official name of the company. Failure to do so may prevent the company from defending actions brought against it under such fictitious business name or sue in that name.
Ensure Business and Personal Finances Are Separate: Once you incorporate or become an LLC, you are legally required to separate your business and personal finances. If you have not done so you may lose all of the asset protection provided by having the entity in the first place. Open a business checking account (you’ll need an EIN from the IRS first), apply for a business credit card if needed, keep separate records and resolve to strictly keep your personal and business finances separated.
Obtain And Renew Permits and Licenses: A variety of government permits may apply to your business. It is time to check for, and obtain or renew local business licenses and operation permits. Make sure you have all of the licenses and permits needed to legally conduct your enterprise.
Dissolve Inactive Entities: Inactive LLCs and corporations must still file business taxes and a Statement of Information, pay franchise taxes, etc. until formally dissolved. Until you formally notify the state that you have closed the business the business will continue to incur liabilities to the state for taxes, filings as well as penalties for not filing.
Memorialize, Memorialize, Memorialize: Make sure you have a paper trail with regard to the conduct of your business that memorializes this year’s agreements, elections, changes in voting rights, issuance and transfers of interests, disbursements out of profits, authorized business endeavors, business debts,
income and reserves, changes in operations, employment and consulting agreements, capital expenditures and calls, and virtually every other aspect of your business. Not only will this offer protection, it provides documentation to protect you and the company and, if you are a corporation, is required to maintain the asset protection afforded by the entity.
These tasks may seem formidable. If they do, call us. Israel & Samuels, LLP is here to help you, not just when problems have already arisen, but, also to provide legal services that minimize the possibility that such problems will arise.
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