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Entity management is essential to the health of your business, whether you’re a small company or a large corporation overseeing multiple entities. CT’s Business Compliance Consultant Sharon Carroll explains some of the basics of entity management, the role it plays in an organization, and how to best manage compliance responsibilities.
Greg: Hi I'm Greg Corombos. Our guest this week is Sharon Carroll, she is a Compliance Business Consultant for CT Corporation, and our topic this week is entity management. We’ve talked a lot in recent weeks about a formal business structure, a formal entity, and now entity management. Sharon, thank you very much for being with us.
Sharon: I’m happy to be here
Greg: So let’s start right with the definition, what is entity management?
Sharon: That’s probably the best question. Where most of our companies do begin is kind of identifying what is entity management to them. And it might be different depending on the type of company they are. Public companies might have a different definition than private companies. Companies with federal regulations might have other information that they need to track. So I like to define it as whatever information becomes the foundation of a particular company. [Entity management] will really be driven by the compliance regulations that they have to abide by.
Greg: What role does it play within an organization? How much of a focus does it need to have?
Sharon: I think we’ve seen in the past years with the passage of Dodd Frank and Sarbanes-Oxley that companies are now taking a really hard look at how they’re doing it. They might have just relegated it to the minute books, which are their corporate hard paper documents, and now they’re looking at ways they can share it amongst other offices and departments. I think they’re now taking it a little bit more seriously, that it has to not be just what the current information is, but also kind of a legacy—what is the history; what was it like a year ago; who were the officers and directors the last time a merger, acquisition, or name change occurred. So I think it’s gained more importance and they’re taking a look at how they can manage it in their day-to-day activities
Greg: What are many businesses facing when they’re managing their entities? What are the major challenges?
Sharon: I think it would be the age-old adage, “Let’s keep doing more with less”. So people are adding this into their already busy, hectic schedules. But it still has an importance, but it may not be someone’s full-time job. They’re looking to add it to—whether it’s a paralegal’s position or a tax manager’s position—so it’s getting their arms around it. Should they be doing it in Excel? Should they be doing it on a Sharepoint or Access database? Or should they be seeking some web-based technology that might be helpful in tracking all of that information? I think it’s defining it and them identifying how they’re going to track the information, monitor it, make sure that it’s accurate, and moving forward, how they’re going to share it and collaborate throughout the organization.
Greg: Like I’ve mentioned before, we’ve talked about entity quite a bit over the past few weeks. When it comes to aspiring business owners, they hear a lot about the need to establish the entity. How surprised are some that they need to manage it?
Sharon: I think it is a surprise. It probably should come in that handbook when we starting forming companies. Many paralegals and attorneys understand that, but I’m not sure that the business owners are aware of that. They understand that they have to have minute books, which are the hard copy documents. But they don’t understand how often people are going to request information that is going to be housed in those hard copy documents, and I think we could all agree when was the last time we actually held paper? A lot of what we do now is electronic, and because of that, that entity management information needs to be the same. So I’ve seen some very forthright company owners who are right on it by putting it to technology. But others may be slow to that point because they didn’t realize that they needed that information. Typically in a year’s time, when they have to file their first annual report or some other client’s deadline, they’re kind of scrambling for that information. And then they learn by the example of being reactive versus proactive in setting something up.
Greg: You’ve talked about this a little already, but talk a little bit more about the external requirements that various corporations need to comply with in order to be exactly where you want to be with entity management.
Sharon: Sure. It can vary. They could be our basic, Secretary of State compliance requirements, which are typically called an annual report. They could be tax requirements with the IRS. They could be regulatory depending on the industry. So, the trucking industry, the pharmaceutical industry--all of those will have different types of compliance, whether they are forms or regulations, renewals, licenses, permits. So, it is getting an idea of what they’re going to need to file to stay compliant. What are those data points that are actually going to be called upon to populate those forms or report to those agencies.
Greg: We’re talking with Sharon Carroll of CT Corporation. Sharon, when it comes to business, everything seems to be changing so rapidly, no matter what aspect of business we’re talking about. So what are some new ways some businesses are approaching entity management that might be different than just a few years ago.
Sharon: I would really have to say that technology has taken a forefront. Many companies, and even their outside law firms, are looking at ways to use technology—whether they’re using just a simple Sharepoint collaboration site, or even building their own Access database. Technology has also come out in the forms of set entity management programs, matter management programs. There’s lots out there, and I’m finding companies really doing the research and finding what’s out there so they don’t have to recreate the wheel, so they don’t have to start from step one. I think that’s what’s important, that there is so many choices out there. They just need to get out there, do their homework, do a little research, and they can do that on the internet by googling “entity management”. And they will come up with not only vendors, but some great content articles from a number of decent associations that can help point them in the right direction.
Greg: Sharon, when it comes to the urgency, the focus that you see, whether it’s small businesses, medium businesses, or even large corporations, their intensity on getting this done, how big of a priority is it for them. How well are businesses going after this and making sure they are complying and managing their entity well.
Sharon: You know I guess I see it at all different levels. Companies that may have had a problem with compliance, either fallen out of compliance or couldn’t find some information. I had a company recently who had to hire an outside law firm to go through all of their hard copy documents to find the information that they’re looking for. So they may have had to pay a price in time, fees or funds that have alerted them to that they might need a better way to manage this information or have it available to them. We also see that in any litigation, that a company may be going to court, they might need to know who were the officers and directors at a specific period in time. So I think we’re seeing some of the larger, or mid-market companies already becoming very proactive in their approaches. But we’d like to get some of the smaller businesses aware that starting at the very beginning is a great way, step-by-step. They can grow from there. But, I think it’s making them aware of the topic, or the importance of the information, so they can get kind of a head start before they’re too large or they’re scrambling for information.
Greg: And if I’m running a small business, and I just come to the conclusion, I know this needs to be done, I’m not the guy to do it. I’m not even sure who to hire to do it. Where do I go for help, and what sort of services do you and CT provide.
Sharon: There are a lot of different companies that are out there in the marketplace. CT I think is unique in the marketplace because we run a number of different services, whether they’re transactional, so they might have used us to form that company. They may use us as an independent director service. But we also have consultative services, and that’s really one of the roles I play as a business consultant is coming in and taking a look at what they’re doing now, and maybe make suggestions of how they could do things better. And it might really be a plan of what they can do by next year, what they can do in the next six months. So we’ve got a lot of different options. Whether that’s passing along information through our articles and the information we have on our website or through our service teams that are physically doing some of the transactional work and meeting with the clients day to day.
Greg: Sharon, terrific advice. Thank you so much for being with us today.
Sharon: I appreciate your time, and everybody have a great day.
Greg: Sharon Carroll is a Compliance Business Consultant for CT Corporation.
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