People looking to file a business close to the end of the year should consider the benefits of a delayed filing vs. a standard incorporation filing. Delaying the effective date of incorporation is the perfect option for anyone who wants to start a business towards the end of the year, while also avoiding unnecessary filing fees for the current year. Let’s explore what this means and the advantages delayed filings provide small businesses.
What Is A Delayed Filing?
When you decide to file an LLC or corporation for your business, the process normally begins right after you submit the paperwork. The effective date of incorporation, or official start of your business, can be hard to predict. Often, this depends on state processing times and other factors. This is because the state can take some time with your incorporation paperwork. This may take anywhere from a few days to several weeks to process.
What happens if you file too early? In some cases, you may be on the hook to submit annual reports and filing fees for the business. This is true even of businesses that start very close to the end of the year.
A delayed filing is an option created to help solve this problem.
How The Delayed Filing Process Works
When you complete a delayed filing, you are filing the paperwork in advance. This is typically 30 to 90 days out into the future. This allows state processing and turnaround times to pass, making your start date much more predictable.
Plus, by setting your start date into the next calendar year, you can avoid any filing obligations for the current year. This is an attractive option when you have a little bit of flexibility when starting your business.
Another situation where a delayed filing is a useful tool is when choosing an exact start date for your business. Perhaps there is a specific date that is significant to your industry or even to you personally. You could line up your business’s anniversary to a key holiday or time of year for instance. A delayed filing is the best way to accomplish this by making the timeline of the process a bit more predictable.
It’s important to keep one additional note in mind during this process. You will not have limited liability protection until the incorporation filing is complete. So, if this protection is something you require right away, or you plan on conducting any business during this period, it might not be the right option for you.
Delayed Filings And Taxes
If you formed your business this year, you will be required to report and pay taxes to the IRS. This is true even if the business is formed in the last few months of the year. Additional fees, like those associated with annual reports, also may be required depending on your state of incorporation.
Since your business is not yet considered active until after the incorporation paperwork is complete, choosing a delayed filing option allows you to avoid preparing a tax filing for your entity for the current year.
Time Is On Your Side With A Delayed Filing
A delayed filing can be great way to set the wheels in motion for your new business. It helps you gain a bit of extra control over the timeline. Your business is guaranteed a specified date of incorporation with a delayed filing, making it easier for you to organize your efforts and make arrangements that may be dependent on your filing date.
What can you do while you wait for the Secretary of State to process and approve your filing? You can use this time to tackle other important aspects of your business. You can file any necessary business licenses and/or permits your company requires, line up a retail space, hire employees by filing for an employer identification number (EIN), and more. A predetermined effective date of incorporation can really make the complicated process of lining everything up much simpler.
I generally advise most people looking to start a new business incorporate or form LLCs as soon as possible. However, it’s hard to rule it out as a great option in the last months of the year, or when you wish to set an exact start date for your business.
A delayed filing is equally as effective as a traditional filing. You can save time and money if you choose to delay your filing.