Nothing feels worse than paying more than you have to because of your own actions. With all things you manage to drive your business, it can be challenging to keep track of legalities that may seem fairly boring or unimportant by comparison.
The only problem – they aren’t so unimportant.
Forgetting important filings and renewals can cost you a lot in late fees and penalties. The first step is maintaining a list of the things you need to track.
1. Statement of Information. California requires every corporation and LLC to file a Statement of Information with the Secretary of State. For-profit corporations need to file annually based on your date of formation while LLCs and non-profits can file biennially. You’ll only part with $25 if you get your Statement in on time. Once your company becomes delinquent, expect a hefty $250 penalty fee to get everything straightened out. Most other states have a similar filing requirement.
2. Tax Returns. No one should be surprised that the IRS and the California Franchise Tax Board want to hear from you at least annually and on-time. You can ask for extensions if necessary – but you need to communicate. If you owe money and you file late, expect late penalties. If you file and pay taxes quarterly based on expected earnings – then you need to be extra careful to track your taxes. If you file annually, note the ending of your business’ tax-year and make sure to file within four months of your tax-year ending.
3. State Licenses. If your business receives special licenses or permits from the state, keep track of the expiration date. Expirations can have no rhyme or reason other than they are the anniversary of the date the state initially processed your license. The consequences of operating without a valid license can be steep and severe – especially if your business is in a field like healthcare, gas stations, insurance, or finance.
4. Local Licenses. They may not seem like much – just a certificate that you might post on the wall somewhere in your office – but local business licenses are still an important legality. Again, these licenses are usually renewable on the anniversary of their initial issuance. You need to note this down and keep track. More importantly, if you operate a business that is specifically regulated by your county or city such as restaurants, then you can face expensive penalties or even forced closure if you don’t keep up on regulations.
As an example, the City of Los Angeles is known for tracking down companies that have not filed for their city business tax certificate, and imposing heavy fines and interest.
5. Federal Regulatory Fees and Permits. If you are a business lucky enough to fall under federal supervision, then you probably need no reminder of the importance of compliance. Keep careful track of your filings and fees. Companies which deal in securities should make SEC and FINRA compliance a top issue just as construction companies that deal with environmental issues need to keep up with permits and fees to the EPA.
In all of these situations – the key is to create deadlines and markers in your calendar – even if you have someone your rely on to deal with these tasks for you. Someone else’s negligence or mistake could cost you financially or even cost you your business.
Best Practice: mark down renewal fee and filing reminders two months in advance of their deadlines. Handle it early. Check in with your accountant, attorney, assistant or whoever you have helping you with these matters as soon as you see that reminder in your calendar.
While many, if not most government agencies will send you reminder notices or forms, you can’t rely on them – and they will hold you accountable either way.