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Today’s regulatory landscape is more and more complex, as state and local governments expand compliance requirements, increase fees and increase enforcement efforts. Even the most dedicated and conscientious business can find it overwhelming to keep up with the constant onslaught of new and changing requirements.
If you’re in the position of ensuring that issues related to entity compliance don’t bring your business to a screeching halt, read on. In just a few minutes, you’ll get an overview of key compliance areas and risks, plus pointers on setting up systems and applying best practices that could help your company to lower or eliminate those risks.
Requirements for corporate compliance are in a constant state of flux as a result of changing laws and the various actions a business takes. Here are some critical areas of compliance you need to engage in:
You have certain responsibilities to the states in which you’re qualified to do business. When you fail to properly comply with one or more of these requirements then your business entity is deemed to have “fallen out of good standing.” The implications of this change in status, if not remedied quickly and properly, can be quite serious and damaging – both to your business and to you personally as the owner of that business. Just as state requirements change, so can aspects of your business that impact your compliance status. Some of these changes may not be obvious to you. In fact, most small businesses like yours are often at greatest risk from compliance violation “trigger” events that you may not even be aware of.
There are two categories of entity status changes that can result in your business falling out of good standing: voluntary and adverse. In both cases, you are required to take the appropriate remedial action with affected state(s).
A voluntary status change reflects an action consciously taken by your business. For example, you decide to change your corporate name, or change its legal structure (such as from a C corporation to an LLC). Voluntary status changes, since you choose to make them, are generally easier to prepare for and respond to in terms of taking steps to meet compliance requirements.
It’s the second scenario – an adverse status change – that presents the biggest risk to your business, and perhaps to you personally as well. These status changes or other lapses in compliance happen quietly in the background, only to emerge at the worst possible time. Something as simple as a neglected license renewal, late fee payment or a failure to post the proper public notice can send your business into crisis mode. In essence, what you don’t know could hurt you.
Should you fall out of good standing, your business operations can be impacted in a number of direct and indirect ways:
Obviously, prevention is the best medicine. The following best practices could help you lower your risk of exposure to corporate-compliance-related problems. How you implement them depends on your business and its unique features. Note that working with a full-service registered agent gives you the option of taking on all, some or none of these tasks yourself.
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