Business leaders have a lot on their plates, especially as organizational goals and expectations shift during these uncertain times. As a result, it can be challenging to keep up with external and internal business compliance requirements. Missed annual business requirements can bring on fines and penalties, along with increasing your business’s risk of exposure to litigation.
Here are the five most commonly missed annual business requirements to plan for in the coming year:
1 – Annual Report and Business License Renewal
Every state has its own annual reporting and business license renewal requirements. Generally, annual reports are forms submitted to state government entities to help keep records current for corporate activity and changes. Check your state’s Secretary of State website to see specific annual report requirements for your type of business entity. Some states do not call their documents “annual reports.” For example, California requires business entities to file a “Statement of Information” annually. Regardless of its title, failure to file the annual report on time can result in the company’s dissolution. Annual reports typically require information including:
- The company’s principal business address
- The names of the current individuals/entities responsible for governing the entity
- The name and address of the company’s registered agent
- In some cases, the number of shares of stock a corporation has issued may be a requirement.
Similarly, federal, state, and local government agencies require businesses to obtain and annually renew business licenses. The purpose of a business license is to give your business legal authority to conduct its regular business activities. Learn about business license requirements by checking appropriate state or local agencies where you will be conducting your business. Common business licenses include the following:
- Occupational and Professional Licenses. Businesses engaging in certain professions or occupations may need a license. Examples include lawyers, doctors, engineers, psychologists, accountants, architects, funeral directors, massage therapists, barbers, and manicurists.
- Industry Licenses/Permits. For businesses engaging in certain types of activities, a license may be a requirement. Examples include child daycare centers, assisted living facilities, hotels, fitness centers, and firearm dealers. Similar to licenses, certain business activities may require permits, such as building permits. The permits may be for construction projects, home occupation permits for rental units, and health permits for food service.
- Business License Tax Certificate. Like Seattle and Los Angeles, some cities require businesses operating in their jurisdiction to obtain business license tax certificates.
2 – Annual Meeting and Corporate Minute Book
Most states require corporations to hold an annual meeting of shareholders to elect directors and vote on specific corporate matters. Corporations must also keep minutes of these annual meetings as permanent records. Typically, there isn’t a requirement for Limited Liability Companies (LLC) to hold such meetings. However, LLC owners should hold annual meetings to ensure all owners are aware of the business’s activities.
A business entity’s governing documents (Bylaws for corporations and Operating Agreements for LLCs) typically dictate the meeting procedures. This includes when and how voting occurs, how many people must be present, and how to provide notice to the shareholders and members. It is imperative that companies abide by these provisions. If they don’t, the business entity risks losing its liability protection, otherwise known as “piercing the corporate veil.”
You might be wondering how you can keep track of all your annual meeting minutes and other corporate documents. Enter, the corporate minute book. A corporate minute book is a central location that stores important records concerning a company. Although there isn’t a legal requirement to prepare corporate minute books, it is an important best practice. They are a great tool to help companies comply with the recordkeeping requirements that states impose. Generally, you should store the following records:
- Organizational documents (such as the Articles of Incorporation, Certificate of Formation, Bylaws, and Operating Agreement)
- Minutes of all meetings of the shareholders, members, and board of directors
- Records of the company’s current owners and their corresponding shares/interest in the company
- Appropriate accounting records
- Financial statements
- Annual reports
3 – Employee Handbook Review
Federal and state workplace laws are constantly evolving, and a company’s employee handbook must change with them. Keeping your employee handbook up to date is a great best practice because it serves several essential functions, including:
- Explaining an employer’s workplace expectations and potential consequences for failure to comply with the employer’s policies and procedures.
- Demonstrating an employer’s compliance with employment laws.
- Answering common employee questions such as how leave time accrues and when the company will pay employees.
- Minimizing the risk of legal claims by encouraging the resolution of workplace issues through internal complaint procedures.
- Establishing the applicable disciplinary process.
Staying up to date with new laws can be a headache, especially for employers with multiple locations in different jurisdictions. As a result, employers need to prepare their handbooks with the assistance of legal counsel. A poorly drafted handbook can increase an employer’s financial and legal exposure.
4 – Insurance Policy Review
Business owners often purchase insurance policies when they form their businesses but don’t think about them unless there are issues. This is a mistake because businesses rarely remain static. Businesses are continually changing with the industry and the needs of their clients and employees. In light of this, insurance policies need annual review to ensure that the business is sufficiently and appropriately protected. For example, suppose your company has added new products or services or leased new equipment. In that case, it is advisable to review your general liability insurance to determine if your coverage limits should increase to maximize your insurance benefit.
5 – General Legal Health Checkup
Just like you visit your doctor and dentist regularly for checkups, your business also deserves a health check. Connect with legal counsel at least once a year to discuss maintaining and/or improving your business’s health. Our team of attorneys will help you gauge your business health through a complimentary business health assessment. Annual health checkups also help find areas of risk and foster future business growth.
Examples of areas to assess each year include, but are not limited to, the following:
- Federal and state minimum wage and hour law compliance
- Overtime exemption status of employees
- Compliance with applicable data privacy laws
- Employee vs. independent contractor designation
Enlist help to limit missed annual business requirements
Don’t let your business’s yearly requirements slip through the cracks. Regardless of industry, every business has legal requirements that need annual attention due to changing laws and business needs. Equinox’s Legal Maintenance General Counsel Solution addresses these bare necessities on a consistent, regular basis. You’ll be able to lead your team to success without the worry of missing annual business requirements. Learn more about the Legal Maintenance solution.
You are not alone – Speak with an attorney to discuss annual corporate governance requirements applicable to your business, business health and risk assessments, reviewing employee handbooks, creating policies and procedures, and more. Contact us at 425-250-0205 or email@example.com.
Legal Disclaimer: This article contains general information. Do not view this article as legal advice. Talk with counsel familiar with your unique business needs before taking or refraining from any action.