Here's a quick checklist of the top 10 legal and tax-related aspects U.S.-based businesses should consider before closing out the year.
The end of the year can feel like a black hole for the small business owner. There are family get-togethers and holiday parties, not to mention closing out projects for time-pressed clients and prepping for the year ahead. While it’s easy to get overwhelmed during these hectic weeks, it’s still important to make time to get your business legally fit for 2015.
Here’s a quick checklist of the top 10 legal and tax-related aspects you should consider before closing out 2014. Note that most specifics are geared towards U.S.-based businesses:
1. Change your business structure
Many small businesses begin as a sole proprietorship (one owner) or general partnership (multiple owners), but then outgrow these basic business structures over time. You may decide that it’s time to incorporate or form a Limited Liability Company (LLC) in order to protect your personal assets and enjoy added flexibility and potential savings on your taxes. Submitting your company formation paperwork before end of the year or early January is the ideal time.
2. Review your estimated tax payments for the year
As we near the ending point of the year, you should have a good handle on how much you’ll make for 2014 and can assess the estimated quarterly tax payments you have made so far. Are you right on track, over or under? You can adjust your final payment (which is due in January for U.S. businesses) as needed.
3. Update your contractor’s W-9s
If you have hired a contractor, and have paid him or her more than $600 for the tax year, you are required to report that to the IRS. Before the year ends, make sure you have current W-9 forms on file for your independent contractors.
4. File any changes with the state
Whenever you make changes to your Corporation or LLC’s information, you will need to update the state or other local agency of the changes. Examples include if you change your business address, a board member joins or leaves, or you make any kind of change to your official business name. In most states in the U.S., this paperwork is called “Articles of Amendment.” While this filing may not be particularly time-sensitive, the end of the year is a good time to catch up and make all of your official records current.
5. Hold an annual meeting for your Corporation
Corporations are required to hold an annual meeting for the shareholders. If you incorporated your business and haven’t already held a meeting this year, make sure you squeeze one in before the year ends. Along with the meeting, you will need to generate meeting minutes signed by the shareholders. LLCs aren’t required to hold an annual meeting, unless you wrote it into your company’s documents when the LLC was formed.
6. File your Annual Report
If you have incorporated your business or formed an LLC, you will need to keep it in good standing by following your state’s requirement for an annual report filing. Some states require filing every year, others require every two years, and a handful of states don’t require this at all. Learn your state’s requirements and deadlines and get this paperwork in on time so you don’t pay any added fees or penalties.
7. Close an inactive business
If you have any kind of business venture that is no longer active, you should officially close it…whether that means dissolving an LLC or Corporation, terminating a resellers license or other permit with your local government office. Without notifying your state or other entity, you’ll still be expected to file an annual report and pay annual dues for your business. That’s why you should get this paperwork in while it’s still 2014. There’s simply no reason to pay any more fees toward a business venture that you have retired.
8. Evaluate your retirement contributions
When you’re self-employed, you are 100% responsible for your retirement savings. If you’re not contributing the maximum to your qualified or individual retirement plans, look at your budget to see if you can channel any extra money into your retirement account. If you have been having trouble allocating anything for your retirement, you may want to consider setting up an automatic contribution for 2015 to keep you disciplined and help grow your savings.
9. Make any large purchases
This is a good time of year to take a closer look at your annual income and expenses. If your revenue is greater than expected, congratulations! But you may also want to consider ways to increase your business expenses and deductions. The end of the year is a great time to make any big purchases you’ve been thinking about, so you can write off the expense under this year’s taxes. In the U.S., there are limits to the amount you can write off in this category (known as Section 179 expenses) and you must put the equipment into use for your business by the end of the year.
10. Prepare your budget for 2015
You can review the past year’s bookkeeping records to make your plans for next year. For example, you can plan ahead for tax payments and other major expenses for the upcoming year. You can estimate your monthly income and determine if your business model needs any tweaking to get you where you want to be. Spending a little time analyzing the past is the best way to get you on the right track for the new year.
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