What Is Business Compliance?
While definitely not the most glamorous aspect of running a business, complying with applicable rules and regulations is a must. Business compliance (known as “corporate compliance” for incorporated businesses) is critical for keeping your company in good standing with your state. The specifics of what you need to pay attention to depend on the legal structure of your company and where you’re registered to operate your business. The compliance requirements Limited Liability Companies (LLCs) and corporations have to meet can vary from state to state (and sometimes even from one municipality to another), so I recommend you contact CorpNet, your lawyer, and/or your accounting professional to make sure you understand what you need to do to stay compliant and avoid late fees and penalties.
Consequences Of Non-Compliance
One of the questions we hear from customers of CorpNet is, “What happens if I fail to meet requirements or don’t meet them on time?
For one, you risk piercing the corporate veil that protects your personal assets from liabilities of your business. If someone sues your LLC or corporation, your home, personal checking account, retirement savings, etc. could become vulnerable if judgment is made against your business. Why put yourself in that situation?
Additionally, your state might impose late fees and levy interest on payments that you owe on certain filings and renewals. Who needs that extra expense?
If you continue to neglect your business compliance obligations, the state might even dissolve your LLC or corporation—leaving you without the liability protection and potential tax benefits that they offer. Sigh. That’s a sad and potentially financially debilitating situation to find yourself in.
So, what does business compliance involve?
Your Small Business Compliance Checklist
As I mentioned earlier, your compliance requirements may be different from those of the business next door or in the state next door. But to give you a head start on thinking about what filings and paperwork you might need to submit, I’ve created the following handy checklist.
- Maintain a registered agent. What is a registered agent? Also sometimes called a “resident agent” or “agent for service of process,” a registered agent is an entity (individual or company) officially recognized by your state to accept service of process on behalf of your business. “Accepting service of process” means the registered agent will receive important paperwork (such as notices to file your annual report or legal notices in the event your business becomes involved in a lawsuit) on behalf of your LLC or corporation. By law, your business needs to have a registered agent as soon as you form an LLC or incorporate. Requirements vary from state to state, but usually, a registered agent must be a natural person resident of the state or an entity having a business office and authorization to do business in the state. Failure to secure a registered agent or pay your designated registered agent’s fees could result in the Secretary of State considering your business defunct. With CorpNet providing Registered Agent Services for all states, there’s no reason for your business not to comply with this very straightforward requirement!
- File annual reports. Many states require LLCs and corporations to submit an annual report either every year or every other year. Some states require it on a less frequent basis. To know what your state’s rules are, check with the Secretary of State office. Also, take note of the due date for filing your annual report. Your state might require it by the anniversary of your incorporation date, at the end of the calendar year, or when your annual tax statements are due. Plan ahead, so you’re not scrambling at the last minute. To save time and money when processing the documents required for filing your annual report, consider having CorpNet take care of the paperwork on your behalf.
- Pay your taxes. Don’t slip up by not paying the taxes applicable to your business (income taxes, sales tax, business taxes, or franchise taxes). You must pay them—and preferably on time—to keep your business in good standing.
- Renew business licenses and permits. If your business needs certain federal, state, county, or local licenses and permits to legally operate, you may need to renew them. CorpNet can help keep you on top of your renewals, so you don’t overlook this mandatory business compliance requirement. We cover all business licenses, permits and tax registrations for all locations in the United States.
- Keep up with your corporate meeting minutes. If you’re running your business as an S Corporation or C Corporation, any time you hold a corporate meeting, you’ll need to record minutes from the meeting. Your corporate minutes should capture details such as time and place of meeting, who attended, who served as chair of the meeting, actions and decisions made, and signature of the person recording the minutes (and the date the minutes were issued). Tip: To simplify preparing your minutes, consider using a meeting minutes template. It’s far easier than doing it all from scratch!
- File for DBAs. If conducting business under a different name from your LLC or corporation, you’ll need to file for a fictitious name, also known as a “trade name,” “assumed name,” or “DBA” (Doing Business As). A DBA makes it legal for you to use that fictitious name when expanding into a new area of business focus or operate another business or website that wouldn’t be well-represented by your current name.
- Record changes via Articles of Amendment. If you changed your company name or business address, have had members of your Board of Directors come or go, or authorized for more shares of your corporation to be sold, you must officially notify your state. You do this through an “Articles of Amendment,” and my team at CorpNet can help you process and file this documentation.
- Don’t commingle business and personal finances. Avoid shades of gray with your finances. Maintain separate checking and credit card accounts for your business, so your revenue and expenses are distinguishable from your personal monies and transactions. I can’t emphasize how important this simple step is for compliance purposes—and for making tax-filing time less taxing.
- Register your business in each state you conduct business. To legally conduct business in a state besides the state where you formed your LLC or corporation, you will need to get authorization. This typically means qualifying as a “foreign corporation” or LLC within the state you intend to do business in. The form to do that might be called a “Statement and Designation by Foreign Corporation” (as in California) or known by some other name. Typically, you’ll need to file that documentation with the state’s Secretary of State office. And, as in your home state, you may need to apply for specific licenses and permits, too. At CorpNet, we handle business registrations in every state, so no matter where you plan to expand, we’re here to facilitate the foreign qualification process.
Get It Done Right—And On Time!
My team at CorpNet has the expertise and experience to help save you time and money and avoid hassles when navigating the multi-faceted world of business compliance. Contact us to learn more about how we can ensure your business filings are done accurately and on time. And for an easy way to keep track of your upcoming compliance requirements, create free CorpNet Business Information Zone (B.I.Z.) account to receive timely notifications as deadlines approach.