Keeping your business in compliance with California law is largely dependent on the type of business entity that you have.
Generally speaking, corporations have the most stringent annual business maintenance formalities, while general partnerships and sole proprietors have the least stringent annual maintenance requirements. No matter what type entity you are operating under, keeping up with your legal business maintenance, at least annually, is strongly recommended.
As a small business owner, it is understandable that simply running the day to day operations of your business can take up all of your time. Putting 100% of your time and energy into the day to day operations is what has made you a successful business in the first place. So, its very easy to see how successful business owners can let their annual legal business maintenance slip through the cracks. While business owners do not see the immediate financial returns on keeping their business up-to-date, doing so is absolutely essential for a business owners continued success. Failure to do so can cost a business everything.
What can happen if you do not properly maintain your business in accordance with California law?
There are plenty of potential consequences of ignoring business formalities, among them:
- If you are a Corporation or LLC, you may inadvertently expose yourself to personal liability (Read more about “Piercing the Corporate Veil”)
- Your business may be subject to extra penalty fees if you are late in filing the required California Secretary of State filings.
- If you are late with your California filings, someone may be able to take your most precious business asset- your business name.
- There may be extra tax penalties if you cannot prove the information you put on your tax return in the event of an IRS audit.
- Your business may be subject to judgments and lawsuits if you fail to appropriately document your business’s activities.
- If you do not stay current with the constantly changing tax code, California and Federal business regulations and statuses you may be subject to legal exposure or lose the benefit of potential tax savings.
- If you are a California corporation or LLC, you may expose yourself and your family to personal liability
Fortunately, it is not very difficult to avoid the consequences listed above. It just takes a little attention to detail. If you know that you are not able to personally give these required tasks the attention they deserve, it is well worth it to work with an experienced business attorney to ensure that your business will stay protected. When you work with a trusted attorney, they will help shoulder the burden of the details and allow you to focus on what you do best-running your business.
Staying in compliance with California is largely dependent on the type of business entity that you have. Generally speaking, corporations have the most stringent annual formalities, while general partnerships and sole proprietors have the least stringent annual maintenance. Below is a list of questions that every business owner should ask themselves at lease once a year.
Read More: Annual Maintenance for a California LLC.
Annual Business Legal Audit
At least once a year, business owners should sit down and evaluate how their business’ have changed over the previous year. Some of the questions that a business owner should ask are:
- Were there any changes in key employees?
- Were there any changes in the management of the company?
- Were there any substantial changes in business assets?
- Were there any capital improvements made?
- What changes in the laws have happened in the past year?
- Were there any changes in ownership?
- Was there a change in the martial status of any of the owners?
- Was there a substantial change in the profit, loss, or type of business operated?
- Were there any changes in the law in the previous year that affect your business?
After you come up with the answers to these questions, you can take your summary to your attorney and he or she will be able to help advise you on the best plan of action moving forward. Below are a list of some of the on-line resources that business owners can use to help stay in compliance.
Tips and Resources:
California Secretary of State Fees, Samples and Forms: Here you will be able to find the all of the California Secretary of State’s business forms. These forms will allow you to file your statement of information, file any amendments, and update the California Secretary of States records with any substantial changes in your business.
Permits and Local License Requirements: This link will help you to find what permits and local licenses are required for your business. This website is a one-stop-shop for the contact information for the different local and state agencies that issue and administer the permits.
Business Search: Here, if your business is registered with the Secretary of State, then you will be able to search your business and verify that it is current and not suspended. Additionally, if you are starting a business and deciding on a name, you can use the search feature to see if the business name already exists.
Fictitious Business Name: If you plan on doing business under a name that is different from your own surname, then you will need to file a fictitious business name in the county where you business in located. Use this link to file a fictitious business name in San Diego County.
You have already put in all of the leg work to get your business up and running, it is well worth to pay attention to details so that you do not lose it all. If you would like some more information on how to make sure your business is protected, please fill out this brief intake or contact our San Diego business attorney to set up a time for a brief consultation.