Starting a business can be fun and exciting, but unfortunately a lot of people only see entrepreneurship for it’s glitz and glam. Once you’re in the day to day operations and having to worry about the proper reports and filings, the requirements running your business may seem a little less sexy. However, making sure you keep up with requirements for your LLC, Corporation or Sole Proprietorship ensures that your business can run smoothly without having to worry about government fines or interruptions.
Basic requirement information for LLC‘s and Corporations
If you own a Corporation or an LLC you are expected to file a Statement of Information and/or an annual or biennial report each year. However you may not be required to file both, so if you own an LLC, first find out if the state you operate in requires you to file both a Statement of Information and an annual report. Some states, like Ohio, Delaware, and South Carolina, no longer ask LLC’s to create annual reports. However, California still does so be sure that you understand what your state’s requirements are.
Virtually all states require LLC’s to file a Statement of Information at least annually. They do this so the governing state authority can find out if your LLC still exists and how it is running. The Statement of Information on each form varies, but it will typically ask you for:
- The name of your LLC
- Your federal tax identification number
- The business you are involved in and it’s purpose
- The names and addresses of the owners who are authorized to sign legal documents
If you have altered the name of your LLC or dissolved it, you may be required to fill out other forms.
For Corporations, California law requests that they file a Statement of Information at least annually. Every Corporation is required to file, including domestic stock and agricultural cooperative corporations, foreign corporations, domestic nonprofit and credit union and consumer cooperative corporations. Corporations in California can either do this online, or they can mail it or take it in person to the Secretary of State’s office in Sacramento. Additionally, a Corporate Disclosure Statement has to be filed by all publicly traded domestic stock or foreign corporations.
It’s important to stay on top of your required filings because in California, if a Corporation fails to fill in a Statement of Information, a fine of $250 is imposed after the date the form should have been filed.
But I am sole proprietor, not an LLC or Corporation
As you probably know, a sole proprietorship is established to allow a single person to run and own a business. While the sole proprietor has complete control and receives all the profits, they are also responsible for paying taxes and accountability for any liabilities. When a sole proprietorship is set up using a name which is not the same as the owner’s name, a Fictitious Business Name, also known as a “Doing Business As” (DBA) Statement has to be filed in the county that the business is located. There is no requirement to file a Statement of Information for sole proprietors.
The only things that you as a sole proprietor need to remember to do is renew your DBA once every 5 years and file your annual tax return, using the specified forms. Check out the earlier blog post, “The business owner’s must-have guide to filing business tax returns” for more information about which forms to use. Additionally, sole proprietors have to report business expenses and income on the Profit or Loss form (the Schedule C Federal Form). The due date is 15th April of each year with your tax rate will depend on the sum of your taxable income.
To Sum It Up, Be Prepared
Filing the proper reports and forms may seem like a pain, but it is something every business owner has to do. Make sure you know what is required on the county, state and federal level for your business structure in order to avoid penalties and fines. By taking care of these nitty gritty details first, you’ll be able to better focus on the fun parts and why you went into business in the first place.
Keep in mind that this information is provided to help you make more informed decisions about your business but does not represent legal advice. We always recommend that you speak with an attorney should you have any questions or need more clarity on this subject.
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