Adhere to the Rules
Compliance with applicable state and federal business laws is critical for the success of your business. Your legal obligations will differ depending on your business type and location.
Complying with both internal and external commercial regulations is necessary for your business to be legally recognized. External requirements typically include filing documents or paying taxes to the state or federal government.
Internal business requirements are meant for your record-keeping purposes. You must maintain comprehensive company records to establish your compliance. These records may come in handy if you plan to sell your business in the future or if you face legal action.
Business Structure-Specific Obligations
Corporations are subject to more stringent internal requirements. They must conduct initial and annual meetings of the board of directors with shareholders, record meeting minutes, follow and enforce bylaws, issue shares to shareholders, and document all share transfers.
LLCs have less rigorous internal requirements but are still advised to maintain an updated operating agreement, issue membership certificates, record all interest transfers among members, and hold annual meetings.
Other business structures have minimal to no internal requirements. Nonetheless, it is always prudent to document important decisions regarding your business.
Current State Filing Obligations
Annual reporting obligations differ based on your business structure and location. However, there are some common requirements to keep in mind.
- Annual report or biennial financial statement: Most states mandate one or the other. Some states set the cutoff date on the anniversary of the company’s formation, while others have a specific day for all companies.
- Filing fee for the financial statement: Typically, filing an annual report or biennial financial statement requires paying a fee, which may exceed $300.00.
- Franchise tax: Certain states levy franchise taxes on corporations or LLCs that operate within their jurisdiction. Formulas differ by state.
- Initial reports: Some states require reports and initial fees shortly after incorporation.
- Amending the articles of incorporation: If you make significant changes to your business, such as changing your address, name, or adding new shares or members, you must report these changes by amending the articles of incorporation (“articles of amendment”).
Federal Requirements for Businesses
Businesses must comply with federal tax obligations by paying income taxes and payroll taxes. In addition, compliance with the Affordable Care Act is necessary, and businesses with 50 or more employees must report to the Internal Revenue Service that they provide health insurance.
Federal licenses, permits, or certificates held by your business must be kept current to ensure compliance.
Additional Federal Requirements
While not mandatory, it is important to comply with all applicable laws pertaining to marketing and advertising, intellectual property, workplace health and safety, workplace signage, and the Americans with Disabilities Act (ADA).
Licenses, Permits, and Renewals
The licenses, permits, and certifications required for legal compliance vary by industry sector and location.
Your business should keep any licenses, permits, or certificates received from your state, city, or county up to date. Renewal requirements may vary, so it is best to check with your local business license office.
For example, restaurants typically need to renew their health and safety certificates regularly, while businesses selling regulated tobacco, alcohol, or tire products may need to renew their sales permits. Professional services such as plumbing or nursing may require certification by an outside board to maintain licensure.
To confirm renewal requirements applicable to your business for federal licenses, permits, and certificates, contact the issuing institution. Below is a list of some federal agencies and departments that small businesses often register with:
- United States Department of Agriculture (USDA)
- Alcohol and Tobacco Tax and Trade Agency (TTB)
- Federal Aviation Administration
- Agency for Alcohol, Tobacco, Firearms and Explosives (ATF)
- United States Fish and Wildlife Service
- National Oceanic and Atmospheric Administration
- Federal Communications Commission.