How to Stay in Good Standing

Business compliance is a lot like Zen Buddhism.

It takes a certain amount of mental effort to become compliant with state requirements, and it takes an equal amount of focus to learn how to stay in good standing, especially as your business grows.

Large businesses and public corporations often have entire departments dedicated to governance and compliance issues. But for small business owners and entrepreneurs actively managing the day-to-day operations of their business, staying on top of compliance requirements often falls to the wayside.

Failure to maintain a registered agent, file an annual report, pay a franchise tax, or renew a periodic filing can have serious consequences for your business. The state can administratively dissolve your business, and can levy hefty fines and penalties. You, the owner, may be subjected to personal liability. Lastly, your credibility suffers, and you might not be able to transact business as usual.

Does he look worried about compliance? Neither should you.

Here are a couple tips on how to stay in good standing. Not all of these requirements may apply to your business, and this list is far from exhaustive. Our goal is to get you thinking about why compliance is important, and to give you tangible examples of steps you can take.

1) Appoint a reliable registered agent

Many small business appoint an officer or individual as the registered agent. One of the duties of a responsible registered agent is to receive annual report notices, and to inform the company of the coming due date. Using a reliable registered agent company, such as Harbor Compliance, will meet the state’s requirement of maintaining the agent, and will alert you to upcoming reports.

2) Speaking of which…have you paid your agent’s invoice?

If you use a registered agent service company, you will renew your subscription annually. If you don’t pay the invoice, the company might charge late fees, or resign as the agent. Upon agent resignation, your entity automatically loses good standing in most states. Don’t lose good standing in your state – pay your agent’s invoice.

3) File your annual reports

Most states have an annual or biennial report requirement. The reports themselves are usually straightforward, and ask you to update address, ownership information on record with the state.

Much more difficult is keeping track of annual report due dates in all states in which your business has registered. Forgetting to file, or filing late, results in unnecessary fees and penalties, and can cause your business to lose good standing.

For a small business, tracking report due dates internally (on a spreadsheet or calendar) is one option, but any missed filing is entirely on you. As your business grows, hiring a service company (such as your registered agent provider) to manage your annual reports filings will avoid costly mistakes. Harbor Compliance makes managing your annual reports easy. With our Annual Report Tracking service, we will keep track of your due dates in every state, and file the reports for you on time. Simply contact us to sign up!

4) Pay franchise and other taxes

In addition to income and sales taxes, several states impose annual business or franchise taxes on your entity, such as Delaware and California. Failure to pay these taxes timely will lead to late fees and penalties, and in some states, can result in administrative (or involuntarily) dissolution. Harbor Compliance can help you track certain franchise tax reminders as part of our registered agent service.

5) Renew Business Licenses

It is important to stay in good standing with licensing agencies as well as the Department of State. Business licenses must be renewed on a periodic basis so that your business can continue to operate. This is particularly relevant in the construction business, where companies often compete for each job, though it can apply to any industry. Failure to renew on time may cause your license to be revoked, can result in lost job opportunities, and cause a blemish on your company’s record going forward.

If you have one or two licenses in one state, tracking and filing license renewals may not be a challenge. As your business expands into new states and industries, managing those licenses may become a full-time responsibility. Harbor Compliance can help. We will track license renewal dates, prepare renewal applications, and get your renewals approved so that you can focus on business as usual.

In Zen Buddhism, the meaning of life is to end suffering. In corporate compliance, shouldn’t that be the same goal?