Is your business structured as a corporation (e.g., an s-corp) or limited liability company (LLC)? Are you meeting all of the ongoing requirements to keep your business in good stating with the state where it operates?
If you’re not, your company could be administratively dissolved. In layman’s terms, this means you and any other owners of the company could lose the personal liability protection that you get as a corporation or LLC. In other words, your personal assets could be at risk if anything goes wrong with your business.
Five of the most common mistakes that causes businesses to lose their good standing with their states are described below. Avoid them and the increased risks they bring to your business and to you, personally!
1. You failed to file the necessary paperwork with the state.
Nearly every state requires that owners of a corporation or LLC file annual reports. Believe it or not, this doesn’t have to be a daunting task. You should be able to find the specific annual report filing instructions for your state on your secretary of state’s website.
Keep in mind, not only do you need to file the paperwork properly, but you also have to file it on time. Also, if you make any changes to your corporation or LLC during the year, you might have to file an Articles of Amendment form. Check your state’s requirements to make sure you do it right!
2. You failed to get a Doing Business As (DBA).
If you’re operating your business under a name that is different from the one you registered with your state, then you need to file a DBA. The rules and penalties vary from one state to another, so check the requirements in your state and follow them!
3. You signed contracts with the wrong business name.
All business contracts should use the exact company name as it appears on your business formation documents that you filed when you registered your business in your state. Otherwise, your contracts might not be enforceable.
Also, only authorized employees can enter into contracts on the company’s behalf. Make sure the right people sign your contracts!
4. You’re operating in another state without permission.
If you open a new office, factory, distribution center, or conduct business in another state, you need to get permission from that state to do so. You have to file for a foreign qualification with that state, so learn the rules and follow them!
5. You mixed your business and personal finances.
One of the biggest mistakes any business owner can make, no matter the business structure of their company, is to mix business and personal finances. Set up separate business bank accounts and credit cards immediately, or the number of expensive problems that could occur can get very long!
Don’t lose the personal liability protection that being a corporation or LLC gives you, and don’t fall out of good standing with your state. Avoid the five mistakes above so your business avoids risks and has a chance to achieve the level of success you want and need.