The last thing you want for your brand-new business is to run afoul of federal or state regulations you weren't aware of. To avoid risk of business dissolution, it's important for you to understand what rules your corporation must follow and put a compliance plan in place, if necessary. We've put together a quick guide to understanding important compliancy pieces for your C Corporation or S Corporation.
Corporate Compliance Means Peace of Mind
Knowing what rules and regulations a corporation must follow is the first step in creating a sound business model. The simple truth is that every corporation needs a compliance plan to outline how they will address the restrictions and allowances made within the law. Once you're aware of the regulations, you may decide your business needs to appoint a business compliance person to keep track of the filings necessary to maintain legal operating status. This could include filing an Annual Report and/or a Certificate of Good Standing to complete certain transactions.
Compliance Starts with Incorporation
By first forming your business as a legal entity, you're beginning the process of corporate compliance correctly. Depending on what type of business entity you choose, there are certain activities you must complete in order to continue operating legally.
For example, a C Corporation owner must designate a board of directors, assign positions within the corporation and issue shares to investors. The board of directors must meet annually and produce an annual financial and operations report. This requirement can sound cumbersome, but it can't be overlooked if you want your C Corp to operate legitimately.
When Do I Need to File Compliance Paperwork?
Many events can happen that require your business to file compliance reports. If you added or changed operating locations, then you’ll need to file a conversion or Foreign Qualification. In this case, "foreign" doesn't necessarily mean operating overseas; it just means each state has different operating rules you'll need to follow. You may also need to make sure you have good standing certificates made for each out-of-state location.
Or, if you changed business sectors, you might need to sign a Dissolution or withdrawal followed by a reinstatement filing.
Going global also comes with a unique set of filings (and some different tax issues), so be aware that these can vary greatly from the state filings necessary to operate in the U.S.
The good news is, if you file any paperwork for your business with us, we'll automatically keep you posted via email on the renewals you need.
Don’t Forget the Tax Laws
While incorporating has its own challenges, maintaining a business under federal and state tax laws can also be complex. To operate in the U.S., you need to register with the IRS, as well as state and local tax agencies.
Often, you'll be dealing with corporate taxes, federal withholding and sales taxes, which all require their own schedule of payment and submission. Handling business taxes on your own as a busy entrepreneur can be cumbersome. Incfile has some great tools to help advise you, or we can take this task completely off of your hands too. No matter which business entity you decide to start, you can rely on Incfile do the hard work for you and support you along the way with reminders for renewals to keep your business corporate compliant. Our business checklist has great information to help you get started.
Whether you decide to take on corporate compliance by yourself or get help from a professional, don't get caught up in the details and lose sight of your business passion. Just make sure you're staying on top of these requirements to operate legally; ignoring them could put your company in jeopardy. Soon, corporate compliance will be part of your normal operating routine as your business grows to reach new heights!