If you operate your business as a corporation or an LLC, you have ongoing compliance obligations. As the year draws to a close, this checklist, prepared by CT’s business compliance specialists can help you ensure you're on top of your responsibilities in these four areas.
Business Licenses
When you opened your business, you probably had to obtain one or more business licenses or permits, even if you operate a home-based or online business. Because revenue generation and protection of the public are key reasons for licensing requirements, many licenses must be renewed annually. Plus, any change in your business may trigger the need for additional licenses. In addition to annual renewals, your licensing needs may have changed over the course of the year. During the year, did you add a new location, change your business hours, or add a new product or service? If so, you may have to obtain additional licenses. Now is the time to verify that you have all the licenses you need.
Foreign Qualification
If you are operating in any state other than the one where you incorporated or formed your LLC, you need to register your business in those states as well. (This process is often referred to as foreign qualification.) Failing to foreign qualify can lead to unpleasant consequences, ranging from fines to being barred from bringing a lawsuit to enforce contracts or recover damages. If you have questions about whether your activities in a state meet the legal test of doing business there, you should seek advice from a business attorney. If you’ve determined you’re operating in a state without having registered, or if you have plans to begin operating in a new state, CT Corporation can help you take the necessary steps to protect yourself.
Annual Reports
Most states require that corporations and LLCs formed or registered in the state file periodic information reports. This report asks for basic information in order to ensure that both the state and the public have the most recent contact information for the company and its registered agent. Some states, such as Delaware, also use this information report to determine the amount of franchise tax due. Unfortunately, it can be easy to miss an annual report filing, particularly if your business operates in more than one state. There is no standard filing deadline. Some states have a fixed date for all businesses, but others base the due date on the incorporation, formation, or qualification date.
Failing to file an annual report is the primary reason that a business will lose good standing with the state. Loss of good standing precludes registering to do business in another state and can jeopardize financing. Plus, if enough time passes without the reports being filed the company can be administratively dissolved. If you think you've missed an annual report filing, the time to take care of it is now. If you are not sure, CT Corporation can help you determine your obligations and your current standing with the state.
Dissolutions and Withdrawals
Businesses decide to cease operating for many reasons. Companies formed for a specific venture (such as a construction project) have a logical endpoint. Or, companies might merge, necessitating the winding up of one business. Sometimes, the owners simply decide to pursue another venture. Regardless of the reason, a corporation or an LLC cannot simply close its doors. Steps must be taken to properly dissolve the business in the state of formation and withdraw from all states where it has registered. Doing so before year-end will eliminate the need to file a partial-year tax return for next year, and may reduce other tax liabilities as well.
Amendments
Some changes to a corporation or LLC require the formation document (e.g., articles of incorporation for a corporation or articles of organization for an LLC) to be amended. For example, if you want to change the name of your corporation or LLC you have to file articles of amendment for the change to be legally effective. Or if your articles of organization say that the LLC is to be member-managed and you want to switch to manager-management you have to file an amendment. And if the corporation or LLC is qualified in foreign states, an amendment to the certificate of authority might be required as well. Make sure all required amendments were filed and that the state’s records on your company are up to date. And if not, be sure to get those amendments filed.
This was originally posted October 2016, it was updated November 2017