Small Business Advice

The 4 tips you need to keep your business in good standing

Keeping your business in good standing with the state ensures that you avoid penalties, fines, and suspension of your operations. Here's 4 tips to help keep your business compliant.

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Congratulations on forming an LLC for your business! You’ve taken the first big step to getting your company up and running. But don’t get your mind off of the legal headache just yet, because you will need to take some steps to keep your LLC in good standing with the state.. 

When you own a business entity, you must keep it in "good standing," or you risk having your entity suspended. Not only that, but you may rack up some fees, penalties, or even lose your personal liability protection if you don’t keep up with state rules and regulations. 

This will also make it easier for you to get access to a “certificate of good standing" from your state when you need one– often needed when you’re applying for credit, signing a major contract, or looking to expand your business into new states. 

Here are some tips to help keep your LLC in good standing with the state

1. File your annual reports on time

Most states require you to file an annual report for your LLC.  An annual report provides basic information about your business such as the names and addresses of your registered agents, directors, admin, and managers. It’s basically a comprehensive report of your company’s activity from the year prior. 

If you don't file annual reports and pay associated fees on time, you may accumulate fines and penalties, and your business may be suspended or even administratively dissolved. Find out when your annual reports are due, and put reminders on your calendar so you don't miss the deadlines. Missing these dates can accumulate into a pretty big issue for your business. The upside is, some states only require the report every two years. . 

Instead of keeping on top of your annual report, work with Nearside, who will do this step for you. 

2. Keep registered agent information up to date

Every business is required to name a registered agent for their LLC in order to accept legal paperwork and official correspondence on its behalf. Many business owners use third-party registered agents, like Nearside or LegalZoom, to separate their business legal paperwork from their personal, but it is also possible to name yourself or an employee as your registered agent.

If for any reason your registered agent changes, is updated, or moves official addresses, you must update it. If you do not, you risk your LLC being suspended. Most states have a simple form for keeping this updated, but if you use a third-party service like Nearside to form your LLC, they typically take care of these updates for you. 

To avoid the risk that your agent information will fall out of date, consider naming a company that provides registered agent services instead of listing an owner or employee to avoid frequent changes.

3. Keep detailed financial records

Financial records are vital documents about your business. For example, your articles of incorporation are included in your records— this is one of the first records you’ll get upon filing your LLC. 

LLC recordkeeping requirements are usually not as strict as corporate records, but LLCs still should have meeting minutes, resolutions, and ownership records.

While it’s legally required, keeping corporate records has genuine practical value for your LLC. Your records help you track your LLC’s progress over the years and can help make filing taxes easier, for example.

These records also maintain what is commonly called the “corporate veil,” which is the separation between the corporation’s assets and the personal assets, to keep your personal liability protected, with payments to and from owners clearly documented.

If you don't observe formalities, you risk being held personally liable for business debts or lawsuits. 

All businesses have recordkeeping requirements, although the exact regulations will vary depending on your business type and the state where the business was formed.

4. Use a third-party to help form and maintain your LLC

As a business owner, there are lots of issues you deal with every day, so you likely don’t need more responsibility or deadlines. Take the legal burden off of your shoulders by filing your LLC, EIN, and registered agent with a third-party.

Third parties will typically maintain your LLC, file your annual reports, and keep your business in good standing so that you avoid the risk of fees and legal penalties. 

This will also make sure you can get a certificate of good standing when you need one. Use a company like Nearside to file your LLC and keep your business in good standing, avoiding the legal headache.

Conclusion

Overall, you definitely want to take proactive steps to keep your LLC in good standing. As long as you file your annual report on time and pay the associated fees, keep your registered agent information up to date, track your financial records, or choose to use a third party LLC service, it should be easy to stay in good standing.

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