The scope of a small business owner’s major concerns is broad and it doesn’t always center on profits. Of primary importance is keeping one’s business in “good standing,” which is a primary focus unto itself.
A business’ good standing is predicated on various requirements, including filing an annual report, timely payment of taxes and state fees, and adhering to sundry state government obligations. By keeping a corporation or LLC in good standing, a business owner will avoid a multitude of legal problems and financial penalties, as well as facilitate the processes of everything from applying for loans and licenses to selling the business.
Earning, and maintaining, a Certificate of Good Standing should never be taken for granted. One error can put your business in danger of being dissolved. As you review various ways to stay in good standing with your respective state government, also consider some oversights to avoid:
Mix and Match Monies
When managing one’s finances, remember the opening line to Rudyard Kipling’s
The Ballad of East and West, “Oh, East is East, and West is West, and never the twain shall meet …” Your business dollars are East, your personal dollars are West, and yes, never the twain shall meet! Once you have established a corporation or LLC, you are legally required to keep your business and personal finances separate from one another. No more comingling of accounts or haphazard bookkeeping. And don’t forget to monitor any business credit card transactions that may cross into the “gray area.”
With so many other business matters to address, paperwork can easily be lost on one’s operational to-do list. However, requisite corporation or LLC forms that must be filed with the state cannot be overlooked or delayed. Check with your state government to verify types of filing and due dates to remain in compliance and make timely paperwork processing a priority.
The Name Game
This may seem obvious, but make sure to use your exact business name in all contracts and official documentation. Depending on one’s incorporated moniker, it might be easy to use a commonly accepted derivative, but doing so can prove costly. If your business operates under more than one legal name, you are required to have updated DBA (Doing Business As) paperwork on file with the state.
Crossing the Line
As your business grows, you may have the opportunity to conduct transactions in other states. Depending on the extent of these activities, you are required to become recognized as a functioning business by every state you “enter.” Doing business in another state requires a process known as “qualification” or “foreign qualification.” This process involves registering a business in states where you legally conduct operations – not just the state or states where your company is headquartered. In order to qualify in a state, your company must obtain a Certificate of Authority from the Secretary of State. Although this can be a time-consuming process, it is time well spent and a smart investment to go through the qualification process so that your business can operate legally and without obstruction.
One convenience that many corporations and LLCs enjoy is the adoption of a registered agent. By doing so, these entities fulfill the legal requirement of maintaining a registered office in their home states, as well as in each state where a business actually conducts business. If you do business in multiple states, you will need a registered agent in each of those states. A registered agent can receive various legal documents on behalf of the corporation or LLC, and fulfill the aforementioned legal prerequisite.
Though the points discussed above may seem like basic information, they can be easily overlooked and cause significant problems for the business operator. A bit of thoughtful preplanning and execution will result in your corporation or LLC being in good standing, now and into the future.