The New Year has officially begun but before you start kicking off all those new projects, have you given your legal situation some thought? With a full year behind you, it’s the perfect time to reflect and reboot so here are 5 tips to get your business legal ready in 2013:
1. Notify the state of any changes to your business (if necessary)
If your business is structured as a corporation or LLC, you’re obligated to alert the state where you incorporated of any changes to the business. For example, if your business changed its address or official company name (even if you just dropped the .com from your official name), authorized more shares, or had any changes to your board or members, you’re required to file Articles of Amendment paperwork with your state. This form will take you just minutes to complete, and is important to making sure your business stays legit.
While you should file an Articles of Amendment whenever the change occurs, the beginning of the year is a good time to look back and make sure you haven’t overlooked any changes during the year.
2. Send in an Annual Report (if necessary)
In addition to alerting the state of any changes, Corporations and LLCs are expected to file an Annual Report with their state of incorporation. The specific requirements vary by state: in some states, you’re expected to file a report every year; in others it’s every two years. In some cases, your due date is based on the calendar year or on your incorporation date.
In short, you’ll need to learn your annual report deadlines from your state. And don’t be late – there’s no reason to pay any extra fees or penalties for not filing this simple form on time.
3. Wrap up your financial books
Every business should have a clear picture of their year-end financial statement. Maybe you’re a new freelancer who’s got a box of paper receipts or maybe you’re a longtime business owner with a bookkeeper. Either way, you need to know how your business performed (in terms of profit and loss) in 2012 before you can make your plans for 2013. In particular, you should assess the year’s profit statements to plan your final 2012 estimated tax payment (due January 15, 2013), as well as ensure there won’t be any major surprises come tax time.
4. Update your vendor/employee records
If you’re planning on giving out 1099’s to vendors or W2’s to employees for 2012, you should verify that your records are up to date, including: current mailing addresses and proper federal ID numbers (either Tax ID numbers or social security numbers).
5. Think about getting a formal business structure
The bulk of small businesses start out as sole proprietorships (single owner) or partnerships (multiple owners). However, many eventually transition to another business structure down the road. If you haven’t formed an official business structure (or at least registered your business name), now is the time to evaluate your options.
Incorporating or forming an LLC carriers several advantages, including:
1. It minimizes your personal liability and separates your personal assets from the business
2. It can give you more flexibility when it comes to taxes (talk to your CPA or tax advisor for specific advice on your personal situation)
3. It can give your small business more credibility
4. It adds a layer of privacy (you don’t have to use your personal name and home address to represent your business)
5. It lets you start building your business credit
6. It protects your business name and brand at the state level (once your business name is registered, no one else can use that name in your state)
If you find yourself with some down time just after the New Year, start to research the various business structures to see what’s right for your business. That way, if you decide to incorporate, you’ll be ready to roll in 2013.
Bonus Tip: Think about if you want to trademark your company name in 2013
While incorporating or forming an LLC will protect your business name at the state level, a trademark filing is required to protect your name at the federal level. For example, if you incorporated your business in Florida, no other business operating in Florida would be able to use your name; however, businesses would be free to use your name in the other 49 states.
In order to protect your brand, you may want to look into trademarking your business name, product name, or other tag line. Start researching how to trademark now to determine if it should be a course of action for 2013.
As a small business owner, you’ve worked hard to launch and build your business. Take a few hours now to make sure your business is ready for 2013.