As the year, and decade, quickly comes to a close, small business owners are focusing on several aspects of their small businesses. They’re prepping ahead for Q1 while celebrating the holiday season with their employees. Small business owners are also diligently working to ensure their companies remain in compliance with the state.
What does it mean to be in compliance? If a small business is in compliance, that means it is in good standing. This is a term that defines the status of the company. Essentially, businesses in good standing are up-to-date with their fee payments and filing periodical reports. If you incorporated as an LLC or corporation, you may even order a certificate of good standing for your business. This document provides physical proof of your company’s compliance.
However, having a certificate of good standing doesn’t mean that you can get out of filing and updating necessary reports with the Secretary of State. Before the year ends, make sure you take care of the following items for your small business.
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Prepare and file an annual report
Annual reports, sometimes referred to as informational reports, is a yearly filing submitted to the Secretary of State. It may sound long-winded to work on, but annual reports are actually quite easy to pull together. Annual reports provide a record of the small business’ activities as well as any changes to the company.
Some of these changes may include, but aren’t limited to, the following:
- Names and address changes of the business members
- Changes to the physical business address
- Name and/or address changes with your registered agent
- Changes in business activities
See? Not that complicated! Before you begin to file your annual report, it’s a good idea to check in with your local Secretary of State. There’s a twofold reason for reaching out. The first is that some states do not require businesses to file an annual report. Depending on your entity formation, and the state’s laws, you may file annually, biennially, or do not need to file at all. If you do need to file, the second reason is largely for the peace of mind in knowing your annual report deadline. Filing in a timely manner keeps your small business from falling into bad standing. Should this happen, the company may have to pay hefty penalty fees or even be dissolved by the state.
[Related: What’s the Difference Between LLC and Corporation?]
Update corporate minutes and bylaws
Businesses that have incorporated as corporations likely understand the importance of maintaining updated minutes and bylaws. Not sure what each term means? Let’s quickly define each one.
- Minutes: These are notes taken during corporate meetings that sum up agenda items and talking points. They are often taken by an appointed individual, then typed up and stored on file the same day. Everyone in attendance at the meeting, as well as those individuals not there, may be able to review minutes from previous corporate meetings.
- Bylaws: These are the corporation’s written rules and regulations. A corporation’s bylaws provide guidelines that cover adding directors and the rights and responsibilities of owners. Additional details include how meetings are conducted and organized and where to store corporate minutes. Changes made in your bylaws must be updated accordingly.
Updating corporate minutes and bylaws does more than keep small businesses in good standing. These documents help keep everyone in the corporation on track. Some may think it’s not necessary to take written notes. After all, can’t you rely on your memory? Better yet, wouldn’t it simply be easier to record the meeting with smartphones and share the recording?
However, it’s difficult to rely on memory if you aren’t in attendance at the meeting. Some corporation members may not be comfortable with having confidential meetings recorded on a phone, either. Appointing a non-biased individual to act as secretary and take notes ensures that the meeting’s agenda is clearly transcribed, available for everyone to review, and easy to present to the Secretary of State upon request.
Getting a head start with a delayed filing
Let’s switch gears for a moment. You’re a new entrepreneur who wants to open their doors for business this month. Should you incorporate immediately or wait to file? While it’s often advised that new small businesses incorporate as soon as possible (and highly recommended), consider opting for a delayed filing.
What’s a delayed filing? This type of filing delays the date of incorporation. Once incorporation paperwork has been filed within 30 to 90 days in advance, delayed filings give entrepreneurs the chance to set an exact start date for their business. This start date will likely be in the New Year — and that actually works to your business’ benefit.
Choosing a delayed filing and setting a start date in the next calendar year means that you save money with taxes. If you incorporated this month, for instance, you would be responsible for collecting, reporting, and paying your business taxes in 2019. even if you hardly did any business. Additionally, delayed filings are prioritized by the Secretary of State. These filings are placed in a special priority queue. This ensures that your incorporation paperwork is not forgotten about, and is approved by the state as quickly as possible.
While you wait for the delayed filing to go into effect, tie up any other remaining loose ends for your business. Maybe you still need to obtain an employer identification number (EIN) or file for a specific business license. Or, best of all, you have everything completed — and can enjoy the holiday season with the peace of mind in knowing that you’re ready for 2020.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.