Another year is nearing its conclusion, and like many business owners, you might be feeling like there’s still much to do before 2019 arrives. I relate to that! It seems that time really flies when you’re running a company. While some lingering to-dos can be put off until next year, some things cannot wait—for example, the various state business compliance requirements for corporations and LLCs. Now is a great time to check in with your attorney and accountant or tax advisor to make sure you haven’t let anything slip through the cracks. Failing to meet your corporate or LLC compliance obligations can result in fines, penalties, or even suspension of your business operations.
To help you understand some of the items your business might need to tackle before the end of the year, I’ve created a year-end compliance checklist of potential must-dos to consider. Please realize that what I’m sharing is not meant as legal or accounting guidance—only licensed professionals can offer that expertise and direction to ensure you meet all requirements that apply to your company. I hope this list serves as a helpful starting point for you and other business owners as you bid adieu to 2018.
An End of Year Business Compliance Checklist to Wrap Up 2018
1. Renew Business Licenses and Permits
Some types of businesses may not be allowed to operate without certain licenses and permits from the state or local government. Not only is it essential to obtain the necessary licenses when starting a business, but it is also critical to renew them as required. Some of the most commonly needed types of business licenses and permits include:
- Local business licenses
- Sales tax permits
- Zoning permits
- Health permits
- Sign permits
- Professional licenses (e.g., accounting, engineering, law, general contractor)
I encourage business owners to contact their state, county, and municipality offices to find out which licenses and permits they need, consult their attorney for that information, or consider using CorpNet’s Business Licenses Services (which can save time and money). By renewing its licenses and permits on time, a business can continue to provide its products and services—and continue to bring in revenue!
2. Review Your Registered Agent Selection
Corporations and LLCs must designate and retain a registered agent to receive service of process (legal and government notices) for them. Now is an excellent time for companies to review their registered agent selection to make sure its services are meeting their needs. For example, if the registered agent is only authorized to practice in one or a few states, a business that has its sights on expanding nationally might benefit from finding a registered agent that can offer services in all 50 states. CorpNet, for example, provides registered agent services everywhere in the U.S. to simplify matters for companies that want to expand their operations nationally.
3. Assess If Your Business Entity Type Is Still Right for You
Especially with the recent tax law changes in full force, entrepreneurs may want to talk with their attorney and accountant to review if the legal structure of their company is still a good fit for their situation. Several considerations that influence which legal structure might be most advantageous include:
- Is the business entity type providing enough personal liability protection?
- Are the tax rates delivering the most favorable outcome financially?
- Does the business have plans to grow that will require investment capital?
- Will the business be taking on partners in the near future?
Changing from a sole proprietorship or partnership to a formal entity such as an LLC or corporations requires filing Articles of Organization or Articles of Incorporation with the state. Changing an LLC to a corporation or vice versa requires an entity conversion. Timing can mean a lot when it comes to changing from one business entity type to another. The earlier in the year a business operates under the legal structure best suited for it, the more it will benefit. After business owners, with the help of legal and financial professionals, decide to change their business entity type, CorpNet can assist them in preparing and filing their business registration documents to make it official.
4. File Your Annual Report
In many states, LLCs and corporations must submit an annual report either every year, every other year, or according to some different schedule (for instance, PA requires LLC to file one every ten years). The state annual report filing requirements are a different animal from the annual reports that the SEC (U.S. Securities and Exchange Commission) requires public corporations to prepare for shareholders. Most state-required annual reports are relatively simple and straightforward; they typically include information like:
- The business’s purpose
- The company’s principal address
- The names and addresses of LLC members and managers or a corporation’s directors and officers
- The company’s registered agent information
- The number of shares of stock the company has issued
Filing an annual report on time is imperative for compliance. An annual report’s due date might fall on one of the following: (a) The end of the calendar year; (b) The anniversary of your incorporation date; or (c) The date that the company’s annual tax statements are due. When filing late, a business might get saddled with late fees or other penalties. Fortunately, filing an annual report can usually be done online. Fees vary from one state to the next. In the interest of convenience, accuracy, and cost-effectiveness, businesses can turn to an online document filing service like CorpNet to ensure their annual report is completed correctly and submitted on-time.
5. Hold Your Annual Meeting
Time is of the essence for corporations to hold their annual meeting if they haven’t yet done that. While LLCs aren’t typically required by state statutes to hold annual meetings, some have it written in their operating agreements to do so. A corporate annual meeting’s primary purpose is to elect the board of directors for the upcoming year. Conducting the annual meeting isn’t enough; meeting minutes must also be prepared to record what happened at the meeting and decisions that were made. These minutes should be kept in a corporate records book and held in a secure location at the business’s office.
6. Report Changes to the State
If an LLC or corporation makes key changes to its company, it needs to notify the state about them through a filing that is called “Articles of Amendment.” Articles of Amendment let the state know that a business has changed information that was on its initial formation documents. Some of the modifications about which most states want to know include:
- Change in business address
- Change in company name
- Changes to the members on the Board of Directors
- Changes in a company’s business activities (i.e., the purpose of the business)
- Change in management format (e.g., member-managed to manager-managed or vice versa) of an LLC
- Change to the type of stock offered by a corporation
- Changes in the number of shares authorized by a corporation
The Secretary of State’s office can share the specific changes that apply to LLCs and corporations in that state. As we do with other business filings, CorpNet can help companies in all 50 states prepare and submit the Articles of Amendment.
7. Check Whether Your Income Tax Paid This Year Is in Line With Your Tax Obligations
This is especially something for small businesses that make quarterly estimated tax payments. If a company hasn’t paid enough income tax on its taxable revenue throughout the first three quarters of the year, identifying that now gives an opportunity to consult a tax advisor on what can be done for the last quarter of the year to avoid a potential penalty for underpayment.
8. Put Your Accounting Records In Good Order
Tax time is around the corner for businesses with a fiscal year that matches the calendar year. Businesses that get their financial records organized now will have a much more smooth tax return preparation process to look forward to than companies that put things off and don’t have their tax information in order. Even companies that have good bookkeeping practices year round can benefit by reviewing their records at this time of year to identify any discrepancies or errors that might need investigation or correction. Reviewing tax information in advance can also help business owners anticipate questions that their tax preparation expert might have and locate receipts and supporting documents ahead of time.
9. Prepare to send 1099-MISC Forms to Any Independent Contractors You Paid in 2018
This is a tax-related item, but I believe it’s worth calling out independently, so business owners remember to tackle it. If a business pays a subcontractor $600 or more during the tax year, the IRS requires that the company send a 1099-MISC form to them. The 1099 discloses the compensation paid to the individual. The IRS’s deadline for furnishing 1099-MISC forms to payees is January 31, 2019.
10. Officially Close an Inactive Business
If an LLC or corporation has ceased operations but hasn’t notified the state, it remains responsible for fulfilling business compliance requirements and paying taxes. Naturally, that can become problematic for a company and its owners! To avoid that mayhem, businesses that have closed should consider filing “Articles of Dissolution” or a “Certificate of Termination” document with the state office(s) where the business is registered. Dissolution documents are usually available online through states’ websites. In addition to the other services CorpNet provides, we also prepare and file the paperwork businesses need to dissolve their companies.
11. Review Your Systems and Processes
This time of year is ideal for reviewing administrative processes that are wasting time or creating additional work for you and your employees. Where there’s room for improvement, consider the many tools, apps, and other resources that are available to streamline business activities and boost productivity.
Say Goodbye to 2018 and Hello to the New Year Without Leaving Loose Ends
By having all of your business compliance activities in order before the ball drops this New Year’s Eve, you’ll have lots to toast to as you raise your glass in celebration. After you’ve talked with your lawyer and tax advisor about what you need to take care of to stay in good standing, remember that my team at CorpNet is here to help you get your necessary filings done accurately and as quickly and cost-effectively as possible.
Don’t delay! Contact us today!