Why does business compliance matter? Keeping records up to date provides the Secretary of State with accurate information about the business. This keeps a small business in good standing. A business falls into bad standing if it does not complete annual filings or pay its fees. What if this happens? The small business may be at risk of involuntary dissolution by the state.
It’s easy to manage compliance once you know which areas require your focus. Stay in good standing by fulfilling these internal and external compliance requirements.
Update Operating Agreements
LLCs may draft a written operating agreement. An operating agreement provides the rules, structure, and regulations for running the LLC. This includes information about ownership, rights and responsibilities of the LLC’s members, rules for joining and leaving the LLC, and dissolution of the entity.
LLCs should have an operating agreement for business compliance purposes. This allows members to refer to the written document with any questions. If the state needs to see the operating agreement, you will be able to share it and prove the validity of the LLC. Update this document each year and detail any changes made in the business.
Update Corporate Bylaws
Corporations must have bylaws. Corporate bylaws share similarities with LLC operating agreements. Bylaws detail the corporation’s rules and regulations. Iformation for conducting meetings, the functions of each corporate office, and shareholder voting formalities may also be found in bylaws.
If key details change about the corporation’s internal management structure, you must update bylaws for internal business compliance purposes.
Record Corporate Minutes
Minutes are records of notes taken during corporate meetings. Minutes must be detailed, legible, and taken in chronological order.
These documents do not need to be updated after they have been taken during meetings. It is a requirement to take minutes during each corporation’s meeting. This is for posterity and to serve as a point of reference.
File Annual Reports
An annual report acts as a record of changes and the yearly activities within a business throughout the year. If an LLC appoints new members, for example, its annual report filing will reflect updates on the names and addresses of the LLC’s new members.
Are annual reports and initial reports the same thing? No. You file an initial report at the offset of incorporating or forming an LLC for a business. It is generally only filed once while annual reports are filed by predetermined dates.
Annual reports are filed on an annual, or biennial, basis. Filing rules may differ depending on your state of incorporation. Check in with the local Secretary of State to determine whether your business needs to file annually or biennially and for the filing deadline.
Pay Statement Fees and Franchise Taxes
Statement fees are paid with annual or biennial reports. Fees may range depending on the state of incorporation. Franchise tax is another critical aspect of business compliance if the state of incorporation charges corporations and LLCs for these fees.
Paying these fees in a timely manner is an important aspect of small business compliance. If they are not paid on time, your business may be charged with late fees which can be much more expensive. It is also possible small businesses may be penalized by the state for late payments. Make sure to pay any outstanding fees ahead of schedule.
Obtain an EIN
An EIN is an employer identification number, or a tax ID. The IRS issues an EIN to businesses which incorporate or form an LLC. This identifies employer tax accounts and ensures the business is collecting payroll taxes.
Where else can an EIN ensure business compliance? You must have an EIN if you decide to hire employees. You will also need an EIN if you decide to open a business bank account or decide to build corporate business credit.
Designate a Registered Agent
The point of contact between a small business and its state of incorporation is a registered agent.
A registered agent may be an individual or third-party organization which accepts service of process on behalf of your business. The registered agent will organize these documents and pass the paperwork along to the business owner in a timely, discrete manner.
Registered agents must be residents in the state in which they do business. They must have a physical street address to accept this paperwork and be available during general business hours Monday through Friday. A business owner may also act as their own registered agent. However, they must be able to fulfill these requirements or else their business runs the risk of falling out of compliance.
Renew Business Licenses
Businesses generally require certain business licenses to operate their companies. These vary depending on the company’s industry, its location, and the state of incorporation. Once a small business obtains a specific business license, they need to renew it per state requirements.
Not sure which business licenses you need? Consider doing business license research with the Secretary of State to see which licenses and permits are applicable to your business.
Running a small business requires fulfilling several tasks. Filing necessary paperwork, paying taxes and fees on time, and submitting reports and renewals on an annual basis keep the company running smoothly. Doing each activity signals to the state your business is active and is prioritizing its business compliance.
Keep your small business in compliance with MyCorporation. Contact MyCorporation at mycorporation.com or give us a call at 877-692-6772.