The final homestretch is a busy time of the year for the small business owner, with your time pulled between trying to meet end of year sales goals and closing out Q4 projects to holiday planning and parties. However, it’s also a critical time of year for wrapping up any legal loose ends associated with your business.
There are a couple of steps to take to make sure your business is legally fit for 2014. By doing so, you’ll be making sure your business gets the right start in the New Year, and you won’t end up paying extra in administrative fees and fines. Here’s what you need to consider before the calendar hits 2014:
1. Incorporate or change your business structure
If you’re like many small businesses you may have started as a sole proprietorship or partnership. But many businesses eventually outgrow these business structures. If your business is not incorporated, you may want to incorporate (either by forming an S Corp or LLC) to shelter your personal assets and perhaps give you more flexibility and cost savings when it comes to your taxes.
If you choose to incorporate, you can look into a “delayed filing” option with a document-filing company. This option lets you get all your paperwork submitted now, then it will be held and filed on the first business day of 2014. This approach will simplify your tax paperwork, since your business will have the same business structure for all of 2014.
2. Close any inactive businesses
If you’ve ever registered a business with the state and are no longer operating it, you need to file a formal termination with the state as soon as possible. Why? Until that paperwork is in, you’re still going to be charged for any fees associated with the business, you’ll need to file an annual report, as well as submit any tax returns.
To close a business, you need to file an “Articles of Dissolution” or “Certificate of Termination” document with the Secretary of State where your Inc. or LLC was formed. Keep in mind that you will need to settle any owed taxes before you can do this (but again, the sooner you take care of this, the better…when it comes to taxes, ignoring the problem won’t make it go away).
Make sure to take care of these matters while it’s still 2013. There’s no reason to keep paying for a business that’s basically been retired.
3. Hold an annual meeting for your Corporation or LLC
If you’ve gone through the work to incorporate your business, make sure you keep it in good standing. If you haven’t held an annual meeting for your Corp or LLC this year, be sure to get one in before the end of the year. Along with the meeting, you’ll need to generate written minutes/resolutions to be signed by the shareholders (Corporation) or members (LLC). If this will be your first meeting, you can find free meeting minutes online to use as a starting point.
4. Make sure you file an Annual report for your corporation/LLC
Most states require some form of an annual report filing (some every year; some every two years). If your state requires you to file this report, there is a specific due date for filing each year. In some cases, it’s on the anniversary of your business’ incorporation date; in other cases, it’s when your annual tax statements are due; and in some cases, it’s at the end of the calendar year. Missing this deadline can result in penalties and late fees, and depleted state budgets mean that we’re seeing several of these late fees grow.
5. File an “Articles of Amendment” to record any company changes
If you made any changes to your business (for example, if you changed your business address, dropped the .com from your official company name, authorized more shares, or a board member left), you’ll need to file an official notification with your state.
This may seem like a pretty trivial thing, but it’s actually essential to keeping your LLC/Corporation in good standing. For example, if your business happens to be sued and your paperwork isn’t up to date, it’s possible that the plaintiff will try to come after you personally.
6. Review your estimated tax payments for 2013
Now that we’re nearing the end point of the year, review what your business has made year to date and assess your estimated tax payments to avoid underpayments or overpayments. You’ll want to adjust your final 2013 payment (which is due Jan 15, 2014) as needed.
The next few months will be busy, but set aside some time to address these legal obligations. It will help you save money in fees and penalties moving forward. And what better gift could you give your business than a fresh start for the New Year?