While 2020 is what we can only hope will be a unique year in many respects, in other ways it is just another year. The end of any year presents an opportunity for each of us to take stock of where we are and to resolve to make sure we are living healthy lives as we move into the new year. The same principle should also be true for companies. How has your business developed this past year? Have you kept pace with your company’s legal needs? MGA has prepared the below checklist as a tool for helping you assess the health of your business and encourages you to consider making any adjustments that might help your company to maintain its health and vitality as it enters the new year.
- Update state records to reflect corporate changes you made this year such as dissolutions, cancellations, name changes, or reinstatements.
- Prepare to file Annual Reports and pay franchise taxes to your state of registration, often due during the first quarter and not on Tax Day. These franchise taxes are imposed on domestic corporations, limited liability companies, and partnerships in exchange for the privilege of doing business and existing as an entity in the state in which the entity is incorporated or organized. These payments are also often made in connection with a requirement for companies to concurrently file an annual report or registration document. These annual (or biennial) taxes are distinct from income taxes. Franchise taxes are calculated in different ways, depending on the state, but in the case of corporations, they are usually based on the corporation’s capitalization, and in the case of LLCs and partnerships, they are usually payable in accordance with a flat fee schedule. Be warned that even if your company ceased business operations this year, these taxes will continue to accrue until the company files a document to officially terminate its existence with the state. Failure to file and pay by the specified deadline will result in a penalty fee and monthly interest, and if in arrears for several years, termination of existence by the state. See this resource from Wolters Kluwer for a full list of annual report due dates across the 50 states.
- Comply with annual governance requirements, such as holding a shareholders meeting and updating your governance documents to reflect any major actions taken over the past year.
- Confirm that you have a written agreement with any independent contractors assigning the rights in their work product to your company.
- Consider how your brand has grown and developed, and whether you might have valuable trademarks that should be protected by registration in the United States or abroad.
- Make sure you have the right agreements in place for all new hires.
- Check that all essential business licenses are active and in good standing.
- Determine whether there is a current and valid contract in place for each of your most important business relationships and revisit the terms of all contracts for any changes.
We wish you and your business a successful new year, and we look forward to serving your legal needs and supporting your business’ growth in 2021!
For more information calculating and paying your annual business entity taxes, contact your tax advisor or MGA LLP at email@example.com or (212) 209-5450.