For a small business, the number of filings required in a given year can be overwhelming, taking much needed time away from growing your business into a success. Let’s take California as an example. A newly formed corporation must obtain a Federal Tax ID number, file an Initial Statement of Information, elect S Corporation status (if desired), file a DBA (if needed), and file an annual statement of information on the anniversary date of the corporation’s filing date. Then, there’s other paperwork like meeting minutes or Articles of Amendment, if you make any changes.
This may seem like trivial paperwork, but it’s actually pretty important. Failure to file required paperwork can lead to fines and penalties. And as states are facing rising budget deficits, they’re looking to ramp up their collection efforts and increase revenues any way possible. Penalties and fines can range anywhere from $175 to $400.
While it’s never fun to pay a dime more than you have to, failing to file paperwork can have even more serious consequences than these extra fees. This paperwork is key to keeping your corporation or LLC in good standing. If your business happens to be sued, a plaintiff may try to show that you haven’t maintained your business to the letter of the law. And in the worst cases, your “corporate shield” is pierced and your personal assets can be vulnerable.
Maintaining a corporation or LLC is an ongoing process. Here’s a general overview of what you need to do to keep your business in compliance. Of course, specific requirements will vary based on your business type and location.
1. File an annual report
Most states require some sort of annual report filing on the anniversary of your business’s incorporation date (in some cases, it’s every two years, or due at the end of the calendar year). It’s a simple form, so be sure to get it done on time to avoid late fees and penalties.
2. File amendments for any changes
If you made some major changes to your LLC or Corporation, you may need to keep your state up to date with an Articles of Amendment form. Examples of changes include: changes to the company name, registered agent, registered office, business address, number of authorized shares, and business activities.
3. Get a Federal Tax ID number
To distinguish your business as a separate legal entity, you’ll need to obtain a Federal Tax Identification Number, also referred to as an Employer Identification Number (EIN). Issued by the IRS, the tax ID number is similar to your personal social security number and allows the IRS to track your company’s transactions.
4. Keep up to date with any meeting minutes
If your business is a corporation (S or C), you’ll need to record meeting minutes (including every action or decision) whenever you hold a corporate meeting. Typical content includes: time and place of meeting, attendance and chair of the meeting, any actions (purchases, elections, etc.), and signature of recorder and date.
5. File a DBA for any name variations
A lot of times, a business has an official name and then uses any number of variants of that name. For example, your official name might be COMPANY, Inc., but you also go by COMPANY or COMPANY.com, etc. In these cases, you need to file a DBA (Doing Business As) for each of the variations.
6. Use your proper name on any contract
In addition to filing DBAs as needed, you should be extra careful about how your business is referenced in business contracts and other forms. Whenever you reference your business, make sure to identify it as a corporation, using Inc. or Corp. (whichever your state requires). And never use your name followed by “dba” (doing business as) on a contract.
This was originally written by Nellie Akalp for Small Business Trends