Stay in Compliance and Avoid the Consequences
Incorporating or forming a limited-liability company has many great benefits, like personal asset protection, tax flexibility, and perpetual existence. The key to maintaining these great benefits is keeping your entity (corporation or LLC) in compliance. Keeping your entity in compliance with the Secretary of State’s office in the state where you formed is known as being in good standing.When an entity falls out of good standing with the Secretary of State’s office, it becomes noncompliant and consequences can occur. Some significant consequences are that the Secretary of State’s office may levy penalties against an entity or even dissolve the company. Additionally, when a business owner fails to follow the steps required to maintain her limited-liability protection, her personal assets may no longer be protected from lawsuits against the company. This is known as "piercing the corporate veil." Piercing the corporate veil applies to both corporations and LLCs. There are some best practices that can help you stay in compliance with the Secretary of State’s office.
- Familiarize yourself with the Secretary of State’s office in the state where you incorporate. Each Secretary of State’s office has a website and usually has a dedicated section for business services. The website contains useful information regarding tax deadlines, business filings, and business licenses. It is also wise to write down the telephone number for the Secretary of State’s office. If you have a question or concern and you cannot find the answer online, call a representative at the office.
- Choose a registered agent to receive your important legal documents. State laws require all corporations and LLCs to maintain registered addresses with the Secretary of State’s office in the states where they are registered to do business. The person or company located at that address must be available during all business hours. A registered agent receives and forwards important legal documents and state correspondence on behalf of the business. As well, some third-party registered agents provide services to remind you to file important business documents, like annual reports or franchise taxes, to help keep your entity in good standing.