The new year is always a great time to get organized and work on your business. All the holiday excitement and stress is behind you. The kids are back in school. And you’re energized and motivated to make this your business’ best year ever.
You’ve probably thought about your marketing plan, long-term strategic vision, and maybe tax strategies, but what about the legal foundation for your company? Are there any loose ends to tie up as you move into a new year? Don’t let any minor administrative requirements fall through the cracks and put you at risk for major trouble, such as losing your personal liability protection. Here are five things to think about to get your business off to a great start:
Incorporate or Form an LLC for your Business
If you haven’t incorporated or formed an LLC for your business yet, now is a good time to get started. While it’s perfectly legal to operate a business without being an official LLC or corporation, you are putting your personal assets at risk. When you incorporate or form an LLC, this puts a level of protection between your personal assets (personal savings, personal property, children’s college fund, etc.) and your business. If your business is ever sued or has bad debt, your personal property may be shielded from any judgment.
Whether you choose to form an LLC or corporation, the start of a new year is the perfect time to formalize your business structure. You’ll be laying the legal foundation to grow your business in the coming years, while also protecting your personal assets.
Close an Inactive Business
Did you form a business that you’re no longer operating? If you formed an LLC or Corporation, you need to formally terminate it with the state. It’s not enough to say that you’re not operating the business or haven’t had any revenue or activity for the year. Until you officially file the paperwork to close it, you’re still on the hook for any annual fees, legal filings (like an annual report) and tax returns.
You need to file an “Articles of Dissolution” or “Certificate of Termination” document with the Secretary of State in whatever state your Corporation or LLC was formed. In most cases, you’ll need to settle any owed taxes before you can do this. And while you’re at it, cancel any permits or business licenses that the business holds.
Renew Business Licenses and Permits in the New Year
Most businesses need some sort of local license or permit to legally operate – for example, a sales or reseller license or a health department permit. Many of these licenses require renewal. If you have any licenses or permits, you should contact your local entity to find of what needs to be renewed when. And if you have never looked into permits or licenses, you can contact your local government office or visit BusinessLicenses.com to find out what types of licenses you need for your business.
File your Annual Report or Other Paperwork
If you’ve gone through the work to incorporate your business, make sure you keep it in good standing. Most states require some form of an annual report filing for corporations and/or LLCs. The deadlines and specific requirements vary by state. Check with your state’s secretary of state office to find out your specific filing deadline. And then make sure to get this paperwork in. Missing deadlines will result in late fees. In worst case scenarios, companies fall into bad standing with the state for not filing.
If you’re having trouble keeping up with your filing requirements, some document filing companies offer a free service to send you automated alerts when a deadline is coming up.
Invest in your Business for the New Year
While I normally don’t encourage business owners to spend any more than they need to, this is a good time to think about any expenses you may have been putting off. Hopefully you have a good sense of your business’ profits and losses from last year and can determine if there’s any extra profit that should be invested back in the business. Invest in a new computer or equipment to maximize your tax deductions for 2019. Consider hiring a contractor to help refresh your social media strategy or website. Or maybe look for a new trade show or conference to attend this year.
In addition to investing in your business, don’t forget to invest in yourself. From one entrepreneur to another, this is hard work – and often 365 days a year. In order to stay sane, healthy and happy throughout the year, make sure to continue your interests outside of the business too!
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Thanks for the advice. This can serve as a checklist for those things that some business owners may forget.