Beyond the legal requirements for launching your LLC or corporation, year-end brings several critical business compliance responsibilities that demand your attention.
Small business compliance means operating within the legal frameworks set by local, state, and federal jurisdictions. These compliance responsibilities can apply to all limited liability companies (LLCs) and corporations, not just large companies. Some even extend to sole proprietors and general partnerships. Taking care of these items will help you begin the new year the right way. This checklist can help you stay ahead of end-of-year business responsibilities.
Steps covered:
- Review annual report requirements
- Review franchise tax obligations
- File Articles of Amendment
- Renew business licenses
- Complete foreign qualification
- Verify registered agent information
- File dissolutions and withdrawals
- Confirm good standing status
- Hold annual meeting
1. Review annual report requirements
LLCs and corporations must submit an annual information report to the filing office in their state of formation and any other state where they are authorized to operate. Depending on the state, this may be called an annual report or registration, statement of information, or another name. Some states require a biennial report to be filed every two years instead of annually.
Annual report due dates can vary by state and entity type, so check filing deadlines, fees, and required disclosures for each state. If you fail to file a required annual report, you’re likely to fall out of good standing and face fines and penalties. If you think you’ve missed a filing, the time to take care of it is now.
Related article: Guide to filing an annual report
2. Review franchise tax obligations
Another common requirement for LLCs and corporations is paying annual state franchise taxes. Also known as a privilege tax, it is a tax for the privilege of being chartered or to operate within a state. Franchise taxes are separate from annual federal and state income taxes.
Some states may impose franchise taxes on any company doing business there, even if it is incorporated elsewhere. So, if you operate in multiple states, you might owe franchise taxes in both your home state and in each state where you have a physical presence or significant economic activity.
Franchise tax payments are often due with the annual report, but it is important to verify the requirements in each state where your business is registered. Even in states with biennial filing or no annual report requirements, you'll still need to pay franchise taxes annually.
Related article: Understanding state franchise tax obligations
3. File Articles of Amendment
If changes have been made to the information outlined in your Articles of Organization (for an LLC) or Articles of Incorporation (for a corporation), you’re required to file an amendment with the state of formation. These changes, for example, could include :
- company name change
- principal office address change
- changes in the number of authorized shares
- change from member-management to manager-management, or vice versa
Filing Articles of Amendment confirms that the company’s authorized representatives have approved the changes. Once approved by the state, the changes are legally recognized and officially recorded.
If you are foreign qualified (registered to do business through the Secretary of State’s office in another state), you may also have to file an amendment to your Certificate of Authority if the information in that document (such as the company’s name) has changed.
Related article: When do you need to file Articles of Amendment?
4. Renew business licenses
Verify that you have all required business licenses, that they are up to date, and keep note of their renewal dates. If your business has expanded or changed in the past year, you might need new licenses or you may need to cancel ones that you no longer need.
If you have home-based workers, you may need to obtain a home occupation permit. Start by performing business license research for local and state requirements.
5. Complete foreign qualification
If you are planning on doing business outside of your formation state, you need to register with the Secretary of State in those states. This process is called "foreign qualification". Having employees who work in states outside your formation state can also trigger the need to foreign qualify.
If you’re operating in a state without having foreign qualified, you could face fines and penalties that carry into the new year.
Related article: What is foreign qualification?
6. Verify registered agent information
If you've changed registered agents, verify that the update is recorded in each applicable state. Accurate records ensure you receive critical legal documents and avoid missed communications. Until the change is officially filed, your old agent remains the official point of contact on state records. This means important notices could go to the wrong place.
Updating your registered agent requires filing a Statement of Change of Registered Agent. Some states allow this change to be made on the annual report instead. Also make sure to update your internal records, such as your bylaws or operating agreement, to reflect the new agent information.
7. File dissolutions and withdrawals
If you are ceasing operations completely, you should take steps to properly dissolve your company. If you are not ceasing all business but are only ceasing to do business in a state (or states) in which you were foreign qualified, you should properly withdraw from those states.
Dissolutions and withdrawals can keep the business in good standing and prevent you from having to file annual reports and pay taxes in your formation state and states of foreign qualification in the new year. It can also protect you from business identity thieves who prey on inactive and delinquent entities.
Related article: How to dissolve a business
8. Confirm good standing status
You should periodically check the good standing status of your LLC or corporation. Good standing generally means your company has maintained its authorization to do business in the state by filing all required reports and paying necessary fees with the Secretary of State.
Maintaining good standing is critical because you'll need a Certificate of Good Standing to expand into new states or secure financing from lenders. You don't want to let a missed filing prevent you from growing your business or obtaining the funding you need.
Related article: What is good standing?
9. Hold annual meeting
Regardless of whether your business is a C corp or an S corp, state laws generally require corporations to conduct an annual shareholder meeting to elect directors and approve major corporate actions. Consult your company’s bylaws for your specific deadline. If you haven't fulfilled this requirement for the current fiscal year, you should aim to do so before year-end.
LLCs typically aren't required by law to hold annual meetings. However, check your operating agreement as it may require you to hold meetings and include rules about how much notice to give members, how many must attend, and what records to keep.
Related article: Internal and external requirements for LLCs and corporations
Learn more
Stay ahead of your business responsibilities with BizFilings, not only for year-end services but for the support you need throughout the life of your business. Contact us to learn more.
