What Do Small Businesses Need to Stay in Compliance?
Starting a small business means taking care of ongoing annual maintenance. These responsibilities tend to vary depending on your entity formation, location, and industry. However, small businesses must fulfill these responsibilities in order to keep the business in compliance with state and federal laws.
Not sure where to get started with your annual maintenance? Here are some of the general internal and external areas to take care of and ensure business compliance.
photo credit: Tim Gouw / Unsplash
File an Annual Report
What’s an annual report? This report records changes made in a business throughout the year. Some changes may include new officers or directors and their names and addresses, changes to the business address, change of name or address to the company’s registered agent, or changes in business activities.
An annual report is not meant to be confused with an initial report. An initial report is filed at the offset of incorporating or forming an LLC for a business. This report includes basic information about the business so that the state may understand what the company does and its daily activities. An initial report is not a requirement for all states or even all entity formations. It’s a good idea to check in with the local Secretary of State to see if your business needs to file an initial report.
When are annual reports due? For some states, they are due on an annual basis. Others have a biennial deadline. It’s best to check in with the Secretary of State in your state of incorporation to see what the deadline looks like for your business.
Maintain Operating Agreements, Corporate Minutes, and Bylaws
Which entity have you incorporated as? If you formed an LLC, you need to regularly update your operating agreement. This is a written document that defines how an LLC is run by its members.
Corporations, on the other hand, must take corporate minutes and bylaws. Minutes are thorough notes taken during meetings. These act as a written record that may be referenced by the business at a later date. Bylaws are the rules and regulations for how the corporation operates. Corporate bylaws determine the rules for electing directors to the board, rights and responsibilities of owners, and outline how to conduct annual meetings.
While it is not a requirement to maintain an LLC operating agreement, it is advised that an LLC has a written operating agreement in place for the organization. Corporate minutes and bylaws are required for businesses that incorporate as corporations.
Obtain Business Licenses
Almost every business requires business licenses, or permits, that allow the company to operate the business within its given industry, city, county, and state. Without this license, your business could be fined by the state, placed in bad standing, and even shut down involuntarily.
Stay compliant by obtaining the specific business licenses required by your company. You may find out which licenses, and/or permits, your company needs through the local Secretary of State.
Register for a DBA
A DBA is also known as a doing business as name. Some states also refer to this as an assumed name, a fictitious name, or a trade name. Obtaining a DBA allows your company to conduct business under a name that is different from your legal business name.
What does this mean? With a DBA, you may accept payments under an alternate business name. It also means that you may open a business bank account. Keep in mind that a DBA filing is not for every business. Not every business will choose to do business under a name that is not their existing name. However, those that do will need to file and register for a DBA to stay in compliance.
Order a Certificate of Good Standing
Some businesses decide they would like to conduct business in a state outside of their original state of formation. These businesses typically need to file an application for a certificate of authority.
A certificate of good standing is often required with this application. This document is issued by a state official. It provides evidence that your LLC or corporation is in existence. Essentially, a certificate of good standing acts as proof of the business’ good standing with the state.
Beyond conducting business operations, you may also use a certificate of good standing to open a business bank account, renew other licenses, and obtain financing, like loans, for the startup.
Pay Franchise Taxes
This depends on your state of incorporation, but it is possible that your business may need to pay franchise taxes. Check in with your local Secretary of State to see if this applies to your organization.
Pay Filing Fees
Don’t forget! Staying in compliance, such as filing an annual report, requires paying filing fees. Remember to pay any associated filing fees with your documents. This will ensure your business stays in good standing with the state.