As the calendar winds down, it’s time for businesses of all types to assess their situation. There is never a wrong time for your business clients to evaluate their compliance situation. This is your chance to get a head start next year! This article will cover some critical considerations that can help them stay in good standing with state agencies come 2022.
Renewal of Business Licenses and Permits
Businesses may need to renew specific licenses or permits before they expire. Your clients should contact their municipality, county (or state), and state offices to know when these licensing requirements must be renewed.
Significant Changes To the Business Should be Reported
LLCs and corporations must file formal notifications with states if there are any critical changes to their company. In most cases, this paperwork is called “Articles of Amendment.” This document formalizes all alterations made on previously filed documents from an LLC or Corp’s Articles Of Organization (LLC) / Incorporation. Some of the necessary changes to report include name and address changes, changes to business purpose, or any changes to the board of directors. For more information, businesses can contact their state’s Secretary of State office.
Prepare an Annual Report and Gather Financial Records
The annual report is a crucial part of your business’s financials. It provides the information you need to know about how much revenue was generated, where it came from, and what kind of expenses were incurred during that time frame. The due date for your LLC’s annual report will vary depending on the state in which it is registered. Filing on time is the best way to avoid fines, penalties, and late fees.
To get a jump start on tax season, your business clients should organize all necessary accounting records and paperwork. It is never too early!
Changes to 1099s
The IRS has made a change that will affect reporting payments to independent contractors (non-employees) who provided their services. Starting with Tax Year 2020, the new option is Form 1099-NEC. If an independent contractor was paid at least $600, they must complete Form 1099-NEC. A copy of this form must be provided from the employer to the contractor, and an additional copy must be sent to the IRS by January 31.
Review Business Entity Type
While it may seem like a simple decision, the type of entity you choose can significantly affect how your company operates, and taxes are handled. As a tax professional, it’s vital to help your business clients determine if their entity type provides them with the most beneficial tax situation. An attorney should always be consulted when making changes to an existing business or starting a new one.
This registration process is relatively straightforward and determined based on what type of business entity they choose. When a sole proprietor or partnership wants to grow their business, protect personal assets from creditors, and reduce the self-employment tax burden, they should discuss establishing an LLC with the state. When entrepreneurs want to form an LLC or corporation, they must file paperwork with the state.
When you’ve helped your client prepare for their business structure, the next step is to submit all of their paperwork. You may want to consider consulting an attorney to assist with the paperwork.
Organize A Company Meeting
An annual meeting is essential for any LLC or corporation because it allows the members of that entity’s board to review what happened during their time and discuss plans. Team members must appoint someone to keep notes during this meeting to document any happenings or important information.
If the business is considering expansion into other states, the annual meeting is a great time to discuss this plan. They will then want to research what needs to be done for their company to qualify its status with each state’s Secretary of State website. Your client can consult you (the tax professional) or an attorney before deciding how they will approach this process. All legal implications must be researched thoroughly.
Preparation is the most important aspect of business compliance responsibilities. Encourage your clients to prepare their obligations now so that they can keep an eye out for upcoming reports and filings; this way, they won’t face any surprises down the road!