With the last few weeks of the year upon us, I imagine, like me, you’re in the midst of finalizing your gift shopping, planning your holiday menu, and RSVPing to party invitations. This time of year never offers a shortage of things to do and people to see. That’s what makes it so much fun…and so exhausting!
But as you’re wrapping presents, make sure you also save some time for wrapping up some important year-end legal and financial loose ends. Taking certain steps now will get your business off on the right foot in the New Year, and it will keep you from the headache of owing penalties and fines for non-compliance.
Here’s what you need to consider before the champagne is poured New Year’s Eve:
1. Change Your Business Structure if it Makes Sense to do so. Many small businesses that start as sole proprietorships or partnerships find they outgrow these structures. Have you been thinking about forming an LLC or incorporating your business? Besides protecting your personal assets by separating them from your business, changing your business structure may also deliver some tax advantages, as well.
Registering your new business structure with an effective date of January 1, 2017 would give you a clean break between when you were a sole proprietor or partnership and when you became incorporated. That keeps things simple for tax filing purposes because your business will have had the same structure throughout the entire year. With a “delayed filing”, you can file between 30 and 90 days (depending on your state’s rules) in advance of the effective date you desire.
If it’s too late for requesting a January 1 effective date through a delayed filing, you might instead file to change your structure after December 17 in 2016. Most states will (for tax purposes) consider your new business structure as effective on day one of the upcoming year even though you officially filed in the year prior.
2. Close Your Business If It’s Inactive. If you’re no longer operating a registered business, you need to formally terminate it. If you don’t, you’ll still be on the hook for paying any required fees, filing required reports, and paying applicable taxes. Closing a business involves filing either an “Articles of Dissolution” or “Certificate of Termination” document with the Secretary of State office where your LLC or corporation was formed.
3. Formally Record Any Company Changes. Have you changed your business address, tweaked your company name, authorized more shares to be sold, or has a member of your Board of Directors left? If yes, you must officially notify your state through an “Articles of Amendment.”
This is an essential task to keep your business in good standing, so that if for any reason your business gets sued, your paperwork is up to date. If your paperwork doesn’t reflect your business’s current information, you’re putting your personal assets at risk in the event of a lawsuit against your company.
4. Review Your Tax Payments for the Current Tax Year. To avoid underpayment or overpayment of your tax obligations, review your revenues, expenses, and tax payments to date. You might want to adjust your final 2016 payment (which is due Jan 17, 2017) to offset any deficit or overage.
5. Hold Your Corporation’s or LLC’s Annual Meeting. Make sure you hold your annual meeting (if required) before this year has ended. And don’t forget to generate written minutes and get sign off from either your members (if an LLC) or your shareholders (if a corporation).
6. If You’re Required to File an Annual Report, Get it Done! Not all, but most states require LLCs and corporations to create an annual report either every year or every other year. There are exceptions, though. For example, Pennsylvania doesn’t require LLCs to file an annual report, but rather a decennial report every ten years to confirm their business names or marks are still in use. You should check on your particular state’s requirements so you know exactly what you need to do and when.
When filing an annual report, you must complete it by a specific annual due date. This might be the anniversary of your incorporation date, when your annual tax statements are due, or at the end of the calendar year.
Whatever you do, don’t miss the deadline! Filing your annual report late or not at all will result in penalties and late fees. Who needs that?
Give Your Business The Gift Of Your Year-End Attention.
To ensure you don’t miss any important tasks before the end of the year, consider consulting with an attorney and tax and/or accounting professional for guidance. And to make sure all your paperwork is filed accurately and on time, consider working with a trusted business filing service, like CorpNet.
While you’re focused on celebrations and some much deserved rest and relaxation as the year winds down, don’t ignore important responsibilities that will help keep your business running smoothly in the future. By carving out some time now, you can enjoy more peace of mind all through 2017.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
