Four Compliance Obligations to Check Before Year End
Operating a business as an LLC or a corporation carries with it various compliance obligations. The final months of the year are an excellent time to make sure that you are on top of your annual requirements. Time spent reviewing your compliance responsibilities now will enable you to begin next year the right way, free from risk. Here are four crucial areas to consider.
Nearly every business—even those that operate online or in the owner's home—requires at least one license. Many of these licenses require annual renewal. Commonly needed licenses are a general business permit, sales tax registration, professional/occupational requirements, and unemployment/workers’ compensation registration.
In addition to annual renewals, your licensing needs may have changed over the course of the year. During the year, did you add a new location, change your business hours, or add a new product or service? If so, you may have to obtain additional licenses.
Now is the time to verify that you have all the licenses necessary to keep your business running smoothly. The BizFilings’ Business License Wizard can help you spot any gaps in your licensing needs.
The state where you incorporated or formed your LLC is your home state. If you do business in other states, you must register in those states as well. This process is often referred to as foreign qualification or foreign registration. There are many unfortunate consequences if you fail to apply for a certificate of registration and appoint a registered agent in every state where you are doing business. The business, and sometimes the owners, can face fines and penalties. The business can also be barred from bringing a lawsuit in that state.
If you have questions about whether your activities in a state meet the legal test of doing business there, you should seek advice from a business attorney. If you’ve determined you’re operating in a state without having registered, or if you have plans to begin operating in a new state, BizFilings can help you take the necessary steps to protect yourself.
Most states require that corporations and LLCs formed or registered in the state file periodic information reports. Usually, these reports must be filed every year, which explains the commonly used name: annual reports. These reports ensure that both the state and the public have the most recent contact information for the company and its registered agent. Some states, such as Delaware, also use this information report to determine the amount of franchise tax due.
While the report asks for only basic information, it can be easy to overlook this filing obligation. This is particularly true for a business that operates in more than one state because there are no standard filing deadlines. Some states, like Delaware, have a fixed deadline for each type of business entity. Others base the deadline on the month of incorporation or formation.
Failing to file an annual report is the primary reason that a business will lose good standing with the state. Loss of good standing precludes registering to do business in another state and can jeopardize financing. Plus, if enough time passes without the reports being filed the company can be administratively dissolved.
If you think you've missed an annual report filing, the time to take care of it is now. If you are not sure, BizFilings can help you determine your obligations and your current standing with the state.
Dissolutions and Withdrawals
Every business has a life cycle. Businesses decide to terminate operations for a wide variety of reasons. Some corporations and LLCs are formed for a specific venture—such as a real estate development or construction project—and have a logical endpoint. Other times, a successful business might merge with another, necessitating the winding up on one of the companies. And, sometimes the owners simply decide to pursue another venture.
No matter that reason, however, if the business operates as a corporation or an LLC, it cannot simply close its doors. Steps must be taken to properly dissolve the business in the state of formation and withdraw from all states where it has registered. Doing so before year-end will eliminate the need to file a partial-year tax return for next year, and may reduce other tax liabilities as well.
End the Year Right to Start Next Year Strong
At year-end, every business owner should take action to ensure that:
- all your required business licenses are current
- your company is properly registered in every state where it is doing business
- every annual report is filed
And, if this is the year you are concluding a business venture, you should also verify that all your dissolution and withdrawal documents are properly filed.
Paying attention to these four areas will prepare you for the coming year.