Failure to submit reports and forms on time can result in fines, penalties, and even suspension or dissolution of a business
I got a good reminder question from a new small business CEO recently. She asked, “are there end-of-year reports that I need to do for my new business”? My response was that now is a great time to ask that question and to get off your “to do list” for the end of the year. The approaching Holiday season is busy enough so don’t wait till the end of December to prepare for some of the mandatory business compliance tasks.
Failure to submit reports and forms on time can result in fines, penalties, and even suspension or dissolution of a business. Not exactly an ideal scenario for saying “goodbye” to 2021 and “hello” to 2022.
Fortunately, with some forethought and planning, business owners can get a jump on their year-end requirements before becoming neck-deep in buying (and wrapping!) gifts, traveling to relatives, and hosting holiday parties.
In my experience, this topic is best tackled by going to one of SCORE’s resources. Nellie Akalp is one of SCORE’s content partners. She is the Founder and CEO of CorpNet.com, a trusted resource and service provider for business incorporation, LLC filings, and corporate compliance services in all 50 states. I will rely on her expertise and share her response to this kind of request which is included in the SCORE resources.
Akalp included several year-end requirements that many business owners must tackle to keep their companies in good standing. Keep in mind that not everyone has the same business compliance responsibilities. They vary depending on the entity type, industry, and where a company is located. For that reason, entrepreneurs should make sure they understand the specific rules and requirements applicable to them. Consulting with a trusted attorney and tax advisor can help ensure nothing gets overlooked.
1. Hold an annual meeting
Nearly every state requires corporations to hold annual shareholder meetings and record minutes from those meetings. In some states, LLCs (limited liability companies) must conduct annual member meetings. Even if not required by statutory rules, an LLC might still have to hold a meeting per the conditions of its operating agreement. Any business responsible for holding an annual meeting but hasn’t held one yet in 2021 will want to schedule it soon!
2. Submit an annual report
Many states require LLCs and corporations to submit an annual report every year. Some have biennial reports (every two years) instead. Business owners must research their state’s rules and deadlines so that they don’t miss this critical compliance responsibility.
3. Review tax payments made in 2021 so far
Businesses (such as sole proprietorships, general partnerships, and disregarded entity LLCs) that make quarterly estimated income and self-employment tax payments throughout the year can benefit from reviewing their year-to-date revenue, expenses, and tax payments. Checking the math can help them determine if they’ve underpaid or overpaid their taxes for the year. Then, they can discuss their situation with their tax advisor or accountant to see if it might make sense to make any adjustments to their last estimated tax payment of the year to offset any overage or shortage.
4. Evaluate if the business entity type still creates the best legal and financial scenario
The business structure a startup chooses initially might not remain the best option as the company grows and evolves. For example, a sole proprietorship that has added employees to its payroll and expanded its product lines may find that the personal liability protection and tax flexibility of an LLC will provide an optimal situation legally and financially. Attorneys, accountants, and tax advisors can help entrepreneurs assess the entity type will serve their needs and determine the ideal time to make the change effective.
5. Inform the state of fundamental changes
Businesses registered as limited liability companies and corporations must officially notify the state of certain changes that have occurred with the entity. In many states, the form used for the filing is called either “Articles of Amendment” or “Certificate of Amendment.”
Generally, changes that warrant an amendment notification include:
- The company has changed its name.
- The business moved and now has a new address.
- One or more of the LLC’s members have left the organization, or there are new members.
- The corporation has authorized more shares to be sold.
- The corporation added a new class of stock.
- There have been changes to who is serving on the corporation’s board of directors.
- The entity has changed its registered agent.
- The business added, changed, or deleted provisions of its original organizational documents – e.g., Articles of Organization (LLC) or Articles of Incorporation (corporation).
Business owners should submit articles of amendment to report changes like these as soon as possible in the year they occurred so that the state has accurate information on record about their company. Having current details filed with the state helps ensure an entity stays in good standing and maintains the corporate veil that protects its owners’ personal assets from legal and financial claims against the business.