Corporate Compliance in the New Year

The new year is the perfect time to get organized and clean up your business matters…Whether it’s forming a corporation or limited liability company (LLC), protecting your business assets, or maintaining/updating your corporate or LLC documents, now’s the time.  It’s a new year and time to start 2008 on the right foot – and MyCorporation.com can help with all of your business and document filing needs.             The following advantages of incorporation should be considered when forming a business: (1)        Incorporate!  The most obvious advantage of incorporation is the limited liability of the company’s shareholders. A company is an entity separate and distinct from its shareholders. The company owns and operates the business and also incurs its liabilities, therefore, the owners of a corporation or LLC can minimize, if not eliminate, the personal risk. Forming a Corporation can provide the protection and tax savings needed to give you peace of mind and make your business even more successful and profitable.  (2)        Benefits to Incorporating. The following are just some benefits associated with incorporating: (a)  Tax Advantages.  Incorporation often provides fore greater tax deductions for the business, your employees, and potentially for family members of business owners.  Even if you are the only shareholder and employee of your business, benefits such as health insurance, life insurance, travel and entertainment expenses may now be deductible (b)        Easier access to capital. Most sole proprietorship and partnership business owners know how difficult it is to raise additional capital for their businesses.  Investors tend to shy away from partnership investments because of the risk of subjecting their personal assets to the liabilities that may arise from the business in which they are investing.  On the other hand, a corporation can readily raise capital by issuing additional shares of stock.  Investors can purchase shares in return for their capital.  This allows a business to raise money without incurring debt or interest charges, thus lowering the cost of capital.   (c)        Easier transfer of Ownership.      Through the sale of stock, a corporation can quickly transfer ownership interest without substantially disrupting operations, complex legal documentation, or dissolving the corporation.  Transferring ownership and raising capital are usually easier through the use of stock. Corporations usually have a perpetual life as well, distinct from that of the shareholders. The following items should be considered to maintain full corporate compliance and the protections offered in connection with corporations and LLCs: (1)        Annual Report Filings for Corporations & LLCs. Most jurisdictions require corporations and limited liability companies (LLCs) to pay annual fees and taxes for the privilege of operating as a business entity. In addition to these annual fees, most states also require that corporations (and often LLCs) submit information about corporate status and activities or corporate changes that will become public record. In most states, this information report is referred to as an “Initial/Annual Report” or “Statement of Information.” Corporations and LLC are required to file this Annual Report/Statement of Information even though they may not be actively engaged in business at the time this filing is due. The applicable filing period varies by state and, in most cases; the fees associated with these “informational filings” are nominal. However, if you fail to provide the required information in a timely manner, your corporation and/or LLC could be subject to suspension and/or revocation in addition to penalties or late fees imposed by the state. (2)        Articles of Amendment or Dissolution.  Many states require that a corporation file a Certificate/Articles of Amendment when making an addition to, deleting from, or otherwise altering the existing provisions of the Articles of Incorporation for a General, for-profit Corporation.  If such additions, deletions or alterations have taken place, it is important to consider filing the appropriate Amendment with your Secretary of State.  Also, in the event that a Corporation or Limited Liability Company wishes to terminate its existence, the entity must file Certificate of Dissolution or Articles of Dissolution.  (3)        Entity Conversions.  Many states now allow for the conversion of a stock corporation into a Limited Liability Company, Limited Partnership, or General Partnership.  In addition, a domestic LLC, LP or GP and a foreign entity may, in some jurisdictions, be converted into a Domestic Corporation.  As such, it is important to consider your entity’s desired corporate status, and consult with your accountant regarding the impact of potentially converting your entity, which would require filing the appropriate conversion with the corresponding Secretary of State. (4)        Bylaws, Minutes, Notices. Internally, it is important to maintain corporate documents and observe corporate formalities so as to maintain the protections afforded by your state’s corporate laws, and to minimize the potential for personal liability.  Accordingly, you should make sure that your corporate bylaws are in place, and up to date. 

In addition, your state may require that you give appropriate Notice of Regular Annual Meetings of the Board of Directors and Shareholders (or the appropriate Waiver of Notice).  Such documentation is important to maintain on an annual basis, and the beginning of a new year is a great time to make sure your corporation or LLC is “in order.”

 Each of these items should be considered at least on an annual basis, but the beginning of the year is the perfect time to make sure your corporation or limited liability company is in good standing and that you are handling all of your corporate matters in a timely fashion.  If you need assistance with any of these document filings, MyCorporation.com offers document preparation and filing services to meet your business needs.