Posted July 25, 2023
| Updated January 12, 2024

How to Proactively Manage Small Business Compliance

Besides going through all the proper steps to set up a business, understanding and following through with ongoing compliance requirements is immensely important. I regularly address small business compliance considerations in my writings on the CorpNet blog and webinars that I present to accounting and tax professionals. Compliance is mission-critical to entrepreneurial success, so in today’s post, I am sharing a comprehensive list of many of the requirements business owners should be aware of.

Realize that business compliance requirements vary depending on where a company is located, the legal business structure, type of business conducted, and other factors. Business owners should research the requirements that apply to them. And I highly recommend that they consider getting professional guidance from a licensed attorney and accountant (or tax advisor) to ensure they understand their specific obligations.

What Is Small Business Compliance?

Small business compliance maintains the good standing of a corporation or limited liability company (LLC) within any state that the entity has been established or given permission to do business. Staying compliant is an ongoing process involving both external and internal tasks.

I cannot stress enough how critical it is for business owners to understand their obligations and always maintain compliance. Corporations and LLCs must monitor their compliance needs yearly. Sole proprietorships and partnerships have fewer requirements.

Non-compliance can hurt a business’s reputation, negatively affect its financial health, and threaten its very existence!

Ramifications of not maintaining business compliance:

  • Risk of piercing the corporate veil (which protects business owners’ personal assets from the liabilities of the business)
  • Possible late fees and interest levied by the state on payments that are owed
  • Poorly affect the ability to obtain financing and attract business opportunities
  • Delay business expansion into other states
  • Possible involuntary dissolution of the business entity

Internal Compliance Requirements

Internal requirements are actions that must be taken by directors and shareholders of a corporation or members and managers of an LLC. Internal records, like those listed below, must be documented as part of a company’s records and should be readily available when selling the company or in the event of a lawsuit.

  • Bylaws
  • Annual Meeting Minutes
  • Operating Agreement

After documents have been executed and approved by the owners (LLC members or corporate shareholders), a business should keep the original executed copies in a safe place along with other corporate records. It should keep the records for at least seven years and make them available to LLC members or corporate shareholders.

Usually, there is no requirement to file bylaws, annual meeting minutes, or operating agreements with the state or other government agencies. Also, notarization is not required.

1. Bylaws

For corporations of any size, bylaws tell how that company will govern itself. Most states require that businesses create their bylaws when they first apply as a corporation.

Examples of details included in bylaws:

  • The number of directors that will sit on the board
  • Range and power of the directors
  • Date, time, and location for annual meetings of the board
  • How the directors are elected or removed
  • How corporate officers are appointed
  • Officers’ duties and powers
  • Date time and location of annual shareholders meetings
  • Voting rules for both directors and shareholders

2. Meeting Minutes

All corporations in the United States must hold an annual meeting and record meeting minutes. That meeting might instead be called an “annual shareholder meeting,” “annual stockholder meeting,” or “annual general meeting.”

Most corporations hold their annual meetings soon after the company’s fiscal year has ended. During an annual meeting, the company’s corporate secretary takes detailed notes, including:

  • Date, time, and location
  • Names of members or shareholders who attended and names of those who were absent
  • Agenda items with a brief description of each
  • Details about what was discussed
  • Results of any voting actions taken
  • The time when the meeting was adjourned

LLCs might also have to hold an annual meeting of their members. Even if not mandated by the state, an LLC will have to hold an annual meeting and record minutes if the entity’s operating agreement requires it.

3. LLC Operating Agreement

An LLC operating agreement specifies the roles, rights, and responsibilities of the members of an LLC. All LLC members must sign the operating agreement for it to be legally valid. While not required to file an operating agreement with the state, LLCs should keep their agreement at their principal place of business to comply with corporate formalities.

Typical elements of an LLC operating agreement:

  • Members’ ownership percentages
  • How profits and losses should be distributed
  • Members’ voting rights
  • If and how LLC members may leave or be removed from the company
  • Process for dissolving the LLC

External Compliance Requirements

External requirements are imposed by the state in which a business is incorporated and any state where it is registered to transact business. Below, I’ve listed requirements that are pretty much standard in most states. However, realize that some states have unique requirements not found elsewhere.

  • Initial Report
  • Annual Report
  • Registered Agent
  • Articles of Amendment
  • DBA
  • Employee Identification Number (EIN)
  • Franchise Tax
  • Foreign Qualification
  • Licenses and Permits
  • Articles of Dissolution

1. Initial and Annual Reports

Generally, corporations and LLCs in the United States need to file an annual report (also known as “Statement of Information”) with the state so that the government has up-to-date information in its records. Generally, annual report filings ask for basic contact and operational information. The specific details requested and due dates vary by state and business type.

In some states, LLCs and corporations must file an initial report shortly after the business entity is formed.

Visit our guide to the annual report requirements by state for more information about where and when annual reports are due.

2. Registered Agent

Sometimes referred to as a “resident agent” or an “agent for service of process,” a registered agent is an individual or company officially recognized by the state where a business is registered. A registered agent accepts service of process (legal notices such as court summons and notices of lawsuits, etc.) and other official documents on behalf of the business. By law, LLCs and corporations must designate a registered agent as soon they register their business in a state.

Requirements vary from state to state, but typically a registered agent must be a natural person resident of the state or an entity having a business office with a physical mailing address and authorization to do business in the state. Business entities must retain a registered agent in all states where they conduct business.

3. Articles of Amendment

Significant changes to a corporation or LLC must be reported to the state by filing Articles of Amendment (sometimes called either a “Certificate of Amendment” or “Certificate of Change”).

Examples of reasons to file an Article of Amendment:

  • Change of address
  • Change of company name
  • Change of contact information
  • Change of Registered Agent
  • Authorization of more shares (or change in the type of authorized shares)
  • Absence of board member or director
  • Changing from a member-managed to a manager-managed LLC
  • Change in the business activities of the company

4. Doing Business As (DBA)

A DBA, also called a fictitious business name or assumed business name, lets the public know who the owner of a business is.

If operating as a sole proprietor, a business owner must file a fictitious name when using a company name that doesn’t include the owner’s full name. If a registered business entity conducts business using a different name from the name filed with the LLC or corporation paperwork, it must file a DBA.

A DBA enables entrepreneurs to operate multiple businesses without having to form a separate LLC or corporation for each business. The rules, requirements, forms, and fees associated with a fictitious name filing vary by state (and sometimes by county).

5. Employer Identification Number

An Employer Identification Number, also known as an EIN or federal tax ID number, allows the IRS to identify a business and track its transactions for tax purposes. EINs are mandatory for LLCs and corporations. Also, sole proprietors and partnerships must have an EIN if they hire employees. Even if a sole prop or partnership doesn’t have employees, it can be helpful to use an EIN instead of a personal social security number to help prevent identity theft.

6. Franchise Tax

A franchise tax has nothing to do with whether a business is part of a franchise. Rather, it is a fee that some states charge companies for the privilege of running a business in their jurisdiction. Not all states levy a franchise tax. The fee structures of the states that do charge the tax vary. For example, California has a flat minimum rate plus a percentage of net income. Others have just a flat rate or percentage.

7. Foreign Qualification

To legally conduct business in a state other than the one where an LLC or corporation was initially formed, a company must apply for foreign qualification. It must do so according to the rules and processes of the state(s) where it intends to expand its business activities.

Examples of when businesses must be foreign qualified:

  • The business has a physical presence in the state — e.g., office space, warehouse, or retail store.
  • The business owner has applied for a business license in the state.
  • The business conducts face-to-face meetings with clients in the state.
  • A substantial amount of company revenue comes from the state.
  • The business has employees working in the state and is paying state payroll taxes.

8. Business Licenses and Permits

A business license gives a company the right to operate a business in a particular area or a particular industry. Depending on the type of business and its location, it may need to get business licenses and permits from the state, county, or town. Examples:

  • Local business licenses or tax permits
  • Payroll tax registration
  • Building permit
  • Zoning permit
  • Health permit
  • Home occupational permit
  • Signage permit
  • Fire permit
  • Alarm permit

Some licenses and permits may need to be renewed annually or according to some other timeline.

9. Articles of Dissolution

When an LLC or corporation becomes inactive permanently, it’s essential to formally dissolve the legal entity. If the company is not formally dissolved, the owners will still be responsible for compliance filings and related fees even after their business has closed.

Typical dissolution process:

  • If the business is a corporation, all business associates need to vote on closing the business. They must then record the final vote in their annual meeting minutes.
  • If the business is an LLC, specific rules vary by state, so owners should review the dissolution requirements in the state’s Limited Liability Company Act.
  • After the final vote to dissolve the entity, owners must file the company’s Articles of Dissolution or Certificate of Termination with the Secretary of State’s office wherever the LLC or corporation was established.

When You Fall Out of Good Standing

If a corporation or LLC fails to meet compliance requirements at any point and falls into bad standing, there are ways to restore a status of good standing with the state:

  1. Contact Secretary of State office to identify why the company fell out of compliance.
  2. File reinstatement forms with the Secretary of State Office.
  3. Pay all outstanding fees due to the state.

Tracking Compliance Requirements

Staying compliant requires attention to detail and constant monitoring of upcoming filings and their due dates. The CorpNet Compliance Center portal makes it easy to keep tabs on requirements and deadlines. Also, some accountants, tax preparers, and attorneys organize, update, and track their clients’ compliance needs in spreadsheets or other electronic systems.

CorpNet also offers a variety of other tools and resources that help entrepreneurs with compliance-related tasks:

I also invite you to reach out to the CorpNet team to discuss how we can help you with your business compliance filings. From obtaining an EIN to filing annual reports to registering for payroll taxes to filing articles of amendment to submitting reinstatement requests, and more, we’re here to help your business start on the right food and stay in good standing. Contact us today to talk with one of our experienced filing specialists!

<a href="" target="_self">Nellie Akalp</a>

Nellie Akalp

Nellie Akalp is an entrepreneur, small business expert, speaker, and mother of four amazing kids. As CEO of, she has helped more than half a million entrepreneurs launch their businesses. Akalp is nationally recognized as one of the most prominent experts on small business legal matters, contributing frequently to outlets like Entrepreneur, Forbes, Huffington Post, Mashable, and Fox Small Business. A passionate entrepreneur herself, Akalp is committed to helping others take the reigns and dive into small business ownership. Through her public speaking, media appearances, and frequent blogging, she has developed a strong following within the small business community and has been honored as a Small Business Influencer Champion three years in a row.
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