Essential Compliance Tips for Newly Formed Corporations

April 09, 2024

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Essential Compliance Tips for Newly Formed Corporations

Navigating essential compliance can be a daunting task for new business owners. This blog post sheds light on the essential legal obligations required to maintain a corporate entity, touching on everything from state and federal regulations to annual filings, tax responsibilities, and corporate governance practices. While we are not attorneys or accountants, our years of experience equip us with insights that we believe will be invaluable to you. Our goal is to assist in keeping your business not only operational but also in excellent standing. However, it’s important to remember that compliance requirements can vary significantly depending on your entity type and the state in which you operate.

What is corporate or business compliance?

According to the U.S. Small Business Administration (SBA), keeping your business compliant with state and federal laws is essential. Your legal responsibility will depend on your business type and location.

Corporations have the strictest internal requirements. Corporations should hold initial and annual director and shareholder meetings, record meeting minutes, adopt and maintain bylaws, issue stock to shareholders, and record all stock transfers.

 LLCs have less strict internal requirements. However, they are generally advised to maintain an updated operating agreement, issue membership shares, record all membership interest transfers, and hold annual meetings. Other business structures have few, if any, internal requirements. However, it’s rarely a bad idea to document important decisions with your business.

What are the state filing requirements for compliance?

Each state has filing requirements based on your business structure and the state in which you do business.  When managing an entity’s compliance in more than one state, using a service provider to assist with these requirements is beneficial.

  • Annual report or biennial statement. Most states require one or the other. Some states set the due date on the anniversary of the business formation date, and other states pick a specific day for all businesses.
  • Statement filing fees. Fees typically accompany the annual report or biennial statement. These fees can be flat or dynamic based on membership, shares, or assets.
  • Franchise tax. Some states charge franchise taxes for corporations or LLCs that operate within their border. Formulas vary by state.
  • Initial reports. Some states require initial reports and fees shortly after incorporation.
  • Articles of Amendment. If you’ve made important changes to your company—like an address, name, new shares, or membership—report them with articles of amendment, a statement of change, or other jurisdictional filing requirements.

What are the federal filing requirements for compliance?

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Most businesses won’t have federal requirements beyond paying federal taxes and complying with the Affordable Care Act. Make sure that you meet all federal tax obligations, including income and employer taxes.

The Affordable Care Act requires businesses with 50 or more employees to report to the IRS that they provide health coverage.

If your business has any federal licenses, permits, or certificates, you must keep them current. Please reach out to your bookkeeper, accountant, CPA, or attorney regarding licensing and permitting compliance.

What is the Corporate Transparency Act as a filing requirement?

According to the American Bar Association, The Corporate Transparency Act is intended to provide law enforcement with beneficial ownership information to detect, prevent, and punish terrorism, money laundering, and other misconduct through business entities. It significantly burdens small businesses that are required to collect beneficial ownership information. FinCEN is a bureau of the U.S. Department of the Treasury.

  • domestic reporting companyis a corporation, limited liability company (LLC), or any entity created by filing a document with the Secretary of State or any similar office under the law of a state or Indian tribe.
  • foreign reporting companyis a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by filing a document with the Secretary of State or any similar office.
  • Reporting companies typically include:
  • Limited liability partnerships
  • Limited liability limited partnerships
  • Business trusts
  • Most limited partnerships, where a filing with a secretary of state or similar office generally creates entities.

Exemptions include securities issuers, domestic governmental authorities, banks, and others that don’t fall into the above categories. Penalties for Failure to File a Report include a $500 per day fine and up to two years in prison for willful violation.

What is a beneficial owner?

A beneficial owner of a reporting company (as any entity required to file a BOIR is called) is defined as any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25 percent of the reporting company’s ownership interests.

When filing a BOIR with FinCEN, the reporting company must identify itself and report four pieces of information about each of its beneficial owners AND for two of the Company Applicants. Reporting companies created after January 1, 2024, must provide the four pieces of information and document image for company applicants as well:

  • Name
  • Birthdate
  • Business Address
  • A unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document), i.e., driver’s license or passport

Individuals may obtain a “FinCEN Identifier,” which can be provided to FinCEN on a BOIR in lieu of the required information about the individual.

A registered agent can assist with compliance requirements.

A registered agent is an individual or entity designated by a corporation, nonprofit, or LLC to receive service of process, tax notices or information, and other necessary correspondence. The benefit of a registered agent goes beyond the statutory requirement. Your registered agent ensures that such vital documents are received and handled promptly, helping the business maintain good legal standing in its state of registration or qualification.

Corp1 offers an annual report monitoring service that will afford you peace of mind when managing multiple entities in a single state or across the U.S. Corp1 can file your BOIR with the US Dept. of Treasury, Financial Crimes Enforcement Network (FinCEN).

We are here to help you so you can run a successful and compliant business.

Corp1 is not just a service company; we are a cohesive unit that cares about your experience and strives to provide exemplary customer service. We want to explain how things work so you are informed and aware of the responsibilities and requirements associated with your entity. We invite you to experience the Corp1 difference and get to know us as we serve you. Contact us anytime; we are here to help.

Corporate compliance

Resources: SBA, FinCEN, American Bar Association