There are a lot of services that you offer to clients, but is corporate compliance one of them?
If your clients have businesses structured as LLCs or corporations, you can help them maintain these structures each year. It’s yet another way to add value to your clients, stay in touch throughout the year and increase your revenue per client.
The first step is to help your clients understand just how important it is to maintain their business structure. Once formed, an LLC or corporation has certain annual obligations with the state. Failing to keep up with these requirements can mean added fees and penalties. In the worst case scenario, a business can be put into bad standing, meaning your client will lose his or her personal liability protection.
Maintaining a corporation or LLC isn’t complicated if you know where to start. Here are six key steps to staying compliant and in good standing:
1. File an annual report with the state.
Most states require corporations and LLCs to file an Annual Report or Statement of Information every year or every two years. It’s a way for the state to keep current with a business’s status and basic information like the address and officers. The specific deadlines and filing fees vary by state. You can check with the state’s Secretary of State office or an online legal filing service to confirm when your clients’ deadlines are. Then, be sure to notify your client when the date is approaching so they’re not stuck with late fees. You can even sign up with an online legal filing service to automate these reminders for you.
2. Report any changes to the state.
Businesses are supposed to notify the state whenever they make any major changes, such as moving to a new location or adding a new board member. In most states, this form is called Articles of Amendment and it’s filed with the Secretary of State’s office.
3. File any DBAs if needed.
Let’s say your client used their official company name when they formed their LLC or corporation, but they often use a more casual variation of the name when they conduct day-to-day business. Any time a business operates under a name that’s different than the official name filed with the state, they’ll need to file a Doing Business As (DBA, also known as a Fictitious Business Name) with the state or county office.
4. Keep their registered agent current.
If your client is using a Registered Agent service, they’ll need to keep up with the service fees. Believe it or not, this is actually a common reason why many small businesses fall out of good standing. They forget to renew their Registered Agent Service, so it stops representing them and any official mail sent to that Registered Agent address gets bounced back to the state. The state then puts the company in bad standing until it provides a valid address of record.
5. Stay up to date with state franchise taxes.
Most likely, you’re already aware that many states levy a franchise tax on corporations and LLCs for the privilege of operating in the state. You can check with the state’s Franchise Tax Board or similar office to find out the specific franchise tax obligations and deadlines for corporations and LLCs. And, if your client’s business is foreign qualified in other states, make sure they stay current with their franchise taxes in those states as well.
6. Don’t forget about local permits and licenses.
When you form a business, you’ll need to register with the state—typically by forming a corporation or LLC. This creates the legal foundation for a business. But then you’ll also need to apply for local permits or licenses in order to legally operate. I like to think of this as needing a driver’s license in order to drive a car. Examples of different permits and licenses are a reseller’s license, health department permit, fire department permit and general business permit. You can check with the local county office, or an online legal service, to find out what permits are necessary for your client’s business type and how often they need to be renewed.
The bottom line is when your clients form an LLC or corporation for their business, they’ll need to keep it in good standing. You can help your clients navigate these compliance requirements throughout the year so they remain in good standing and avoid any unnecessary late fees.