The end of the calendar year is coming fast. Are there any legal compliance steps for my business that I should take to wind up 2016 and be ready for 2017?
It’s hard to believe that we’re already in the second week of November — I am always surprised by how fast the time between Thanksgiving and New Year’s Day passes.
Legal compliance activities can seem like a mystery, but in most instances they are fairly straight forward. Here are some important annual compliance measures that businesses should be aware of:
File your statement of information with the Secretary of State
This document serves as an update to the state of California concerning who the owners and executives of your company are.
Corporations are required to file this document annually, while Limited Liability Companies (LLCs) need to ﬁle only every other year.
There are late penalties for failing to file, and your due date is based on your entity’s filing date. E-filing is available online at the Secretary of State’s website.
Conduct an annual meeting
Your formation documents (corporate bylaws or LLC operating agreement) will give instruction on how to properly conduct an annual meeting of the company owners and company management.
The meeting can be as simple as affirming and approving the activities of the previous year, or if necessary, as complex as developing long-term planning strategies and discussing significant financial or structural changes to the business.
This also provides a great opportunity for everyone to check in with one another on how things are progressing with the business.
Take minutes, write them down, add a copy of the minutes to your company’s minute book, and provide attendees and absentees with copies.
If you have not performed annual evaluations of your employees, while the holiday season may not be an ideal time to conduct those evaluations you may want to take use the milestone of the New Year to schedule performance evaluations.
Performance evaluation meetings are also an opportune time to award end-of-year bonuses, if your company offers those incentives.
Incorporate or form an LLC
Many sole proprietors or partnerships wonder when to form a limited liability entity.
The end of the year, and specifically the last two weeks of December, is an excellent time to form your new business entity.
If you form your entity too far in advance of the end of the year, you will owe franchise taxes to the State of California for the current year as well as the next year, but by waiting until the very end of the year, franchise taxes will not be assessed for the current year.
If you commence business operations under the new entity as of the first day of the New Year, you may save money by only operating as one entity type during the year, which means you should only have one tax return to file for the year.
If you wait, you may have to file two tax returns, which is an additional cost for your business.