Closing out the year is not just about the financial aspect of your business. It is also an essential time to ensure any and all legal aspects are taken care of before the year becomes anew. Catching any issues—significant or minute—will save time, money, and will reduce any risk of liability. Here is a checklist that can help you, as a business owner, to stay current and avoid any unnecessary risks.
Corporate Housekeeping & Compliance
Before the year turns over, you should take the mundane, yet critical, task of confirming that annual filings, such as a state annual reports, franchise taxes, or any industry-specific licenses as are up to date. If you own a small business, refer to the U.S. Small Business Administration’s website for further information, especially if you need to apply for any licenses or make sure you have the correct ones.
It is important to confirm whether your business is structured as an LLC (limited liability company), corporation, partnership, or another entity to ensure compliance with both tax and liability requirements. Reviewing the structure also allows you to anticipate potential changes, whether the business grows or remains the same. This review becomes especially crucial when operating across multiple states, since each state imposes different legal requirements.
Lastly, just how one reflects at the close of a year and the start of a new one, it is helpful to review shareholder or board minutes, resolutions, and bylaws to ensure they accurately reflect actual decisions and operations of the business.
Contracts, Employment & Risk Management
Now is the time to guarantee your employees are supported and that your workplace practice remains risk averse. Check your employee’s contracts to ensure they comply with current labor laws pertaining to sensitive areas such as non-compete or confidentiality.
Be sure to scan for clauses that may automatically renew obligations for a new term, and consider whether moving to a fixed term with an explicit renewal process would be more suitable in the future. While convenient, an automatic renewal clause can inadvertently bind your business to obligations with outdated terms or relationships that no longer serve its best interests.
Also, reassess employee handbooks to make sure they are current and that each employee is properly classified (W-2 vs. 1099). Review any and all insurance policies (such as liability, cybersecurity, privacy) to confirm coverage is adequate for the ever-changing business landscape.
Lastly, to avoid your “day in court,” identify and address any outstanding claims, disputes, or potential litigation before the year ends. All of these contract-related issues can easily be overlooked, but will prevent wasted time, money, and uncertainty in the long run.
Financial, Tax & Strategic Planning
Building on the previous recommendations, it is also vital to prepare for the upcoming tax season. While Tax Day in the United States falls on the same date for all, the specific filing deadlines can differ depending on your business structure. To adequately prepare, it would be helpful to coordinate with any accountants on deductions, bonuses, and year-end compensation to optimize tax strategy. In the same vein, ensure payroll and financial statements are accurate and reconciled for clean reporting.
If you have any intellectual property or digital assets, check to verify that your trademark or copyright, domain ownership, and software licenses are current.
Conclusion
If you would like to tailor this checklist to your specific industry to further achieve your goals for another year of success, contact Romano Law today.
Reviewing these three areas annually helps prevent costly mistakes and helps reflect on goals to help make your business grow. Check out some of our other blogs that might aid your business such as, Best Corporate Practices in a Down Market
Contribution to this blog by Sofia DiNatale.
