End-Of-Year Business Compliance Checklist
There is no way around it: as the summer is coming to an end, business owners know it’s time to complete their business compliance checklist for their limited liability company (LLC) or corporation. Failure to achieve this can lead to fines, penalties, and possibly even the dissolution of your company. Now is a good time to contact your business attorney and tax advisor to ensure that you’re on the right track towards year end compliance.
There is an array of business decisions that can sometimes trigger a year-end compliance item. For example, if you’re operating a corporation and have made changes to your Articles of Incorporation, you may have to file an amendment with the state of formation. Sound daunting? Use the following End-Of-Year Business Compliance Checklist to ensure that it won’t be.
Let’s get started with verifying if you have met all of your licensing requirements. Certain licenses must be renewed annually, while others might even need to be canceled. Whether your business requires a federal license or permit depends on your business activities that are regulated by a federal agency. License and permit requirements and fees depend on the agency issuing the license or permit. If you started a new business, be sure to check if any of your business activities are listed with US Small Business Administration and look up the issuing agency for details on the business license cost. By contract, if you are shutting down a company location, you must cancel your business licenses at both the state and municipal levels. On the other hand, if you participate in a merger or acquisition or add a new product or service, you may be required to apply for additional licensing such as a local business license.
Dissolutions and Withdrawals
If your business hasn’t been running smoothly and you believe it’s time to close, simply ceasing all production and business activities isn’t enough. You must file “Articles of Dissolution” or a “Certificate of Termination” to properly dissolve a business in the state of formation and withdraw from all states where it has been registered. Doing so before the end of the tax year eliminates the need to file a partial-year tax return for the following year and may reduce other tax liabilities as well.
As the year comes to an end, it’s important to check up on your reporting requirements. Corporate legal requirements mandate that you hold an annual meeting for the election of board directors. At the board meeting you may also elect new company officers. Your company secretary should take minutes of each meeting and file them in the company minutes book. Most businesses now store their records electronically. However, traditionally business owners have used a loose ring binder called a minute book (sometimes referred to as a corporation kit or corporate record book) to store meeting minutes and written consents of the board of directors, members, shareholders, the governing documents, a share transfer ledger, and the share certificates. Businesses that want to store paper copies can buy a minute book from a service company or create its own. A company must keep records of:
- Books and accounts.
- Minutes (including written consents) of all proceedings of the owners, shareholders, board of directors, and any committees.
- The original issuance of shares or membership/partnership interest by the company.
- Each ownership transfer that has been presented to the company for registration of transfer.
- The names and addresses of each current and past owner.
- The number and class or series of shares or ownership interest certificates issued by the company held by each current and past owner.
If a taxable entity required to make its franchise tax payments a franchise tax payment or extension must be made in a timely manner or a no tax due report must be filed. In addition, it is essential that you meet all other annual report requirements, including filing delinquent reports for businesses that ceased operations during the year.
Changes in companies are not uncommon, but there are steps that must be taken in order for these changes to be legally approved. For example, if you own a limited liability company and want to switch LLC management from member-managed to manager-managed, you must file an amendment with the state of formation. Or if you own a corporation and want to change its name, you must file an article of amendment in order for the change to be legally effective.
Registering with Workforce Commission
If you are an employer subject to your locate state’s Unemployment Compensation Act, you must register with that state’s workforce commission. For example, Texas Employers must register with the Texas Workforce Commission (TWC) within ten days of becoming subject to the Texas Unemployment Compensation Act (see Texas Workforce Commission: Determine Whether You Need to Establish an Unemployment Tax Account and Texas Workforce Commission: Unemployment Tax Registration).
Intellectual Property Protection
The end of year is a good time to consider filing for any necessary intellectual property protection, including:
- a state trademark with the secretary of state (see Texas Secretary of State: Trademarks FAQs);
- a federal patent or trademark with the US Patent and Trademark Office; and
- a federal copyright with the US Copyright Office.
Your business might be eligible for beneficial tax incentives and credits. Information on these incentives and programs can be found at the state agency level. For example, for Texas businesses:
- Texas Business Incentives and Programs Overview has information on tax incentives and credits, including those relating to property taxes, the environment, manufacturing, data centers, research and development, and business relocation.
- Tax-Related State and Local Economic Development Programs provides a summary of economic development programs prepared by the Comptroller.
- Tax Relief for Pollution Control Property Program applies to a facility that uses certain property or equipment to control pollution.
For general information on Texas state taxes, see Comptroller: Taxes.
Other advice and assistance to businesses is available through the following agencies and programs:
- The US Small Business Administration (SBA). Programs the SBA offers include:
- 8(a) Business Development Program, an SBA program designed to help small, disadvantaged businesses;
- Historically Underutilized Business Zones (HUBZone) Program, a program designed to help small businesses in distressed urban and rural communities gain access to federal procurement opportunities;
- Women-Owned Small Businesses (WOSB) Federal Contracting Program, a program designed to provide greater access to federal contracting opportunities for WOSBs and Economically Disadvantaged WOSBs; and
- Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, a program designed to provide SDVOSBs with exclusive competition to federal procurement opportunities.
- SCORE, a non-profit association for the benefit of entrepreneurs and small businesses.
- The Minority Business Development Agency, a part of the US Department of Commerce.
- The Chamber of Commerce (local, state, or national).
Business Expansion into Other US States
If you’ve been having a particularly successful year, maybe your business is expanding to new US state territories. This comes with its own set of business qualification requirements. Although state requirements vary, qualification to do business in other states typically involves:
- checking the company’s name availability and, if required, choosing a name for the company or corporation to use in that state that complies with the state’s requirements;
- identifying a registered agent and office in the state;
- preparing and filing any necessary documents, such as a certificate of authority. This document usually requires information similar to the certificate of formation that the corporation submits to service of process in that state;
- paying fees; and
- fulfilling the state’s applicable reporting requirements, such as filing annual reports.
Failure to register your foreign activities can result in fines, loss of access to state courts, and other penalties. Therefore, when you expand your business into other states territories, it’s important for you to follow proper business law protocols.
If you are doing business internationally, your compliance responsibilities may extend around the world. Make a point of performing routine checks on your global entities, ensuring that their licensing is not expired or outdated. Keep in mind that compliance regulations differ from country to country, even down to the municipal level. Therefore, it is essential to conduct research and ensure that you are abiding by the country’s laws and regulations.
Houston Business Attorney
This has been a difficult year for everyone, and while this checklist may appear overwhelming, it is manageable with the proper help. Furthermore, be aware that failing to comply with various federal, state, and municipal regulations can result in fines, loss of good standing, and other consequences. It’s a good idea to avoid these repercussions for your company by consulting with a business attorney or a tax advisor to discuss your plans for completing your very own compliance checklist.