The COVID-19 pandemic has disrupted every facet of American life. Everything from how we dine out and socialize with each other, to the very paradigm of doing business has changed. Now several months into an ongoing crisis, many small businesses have adopted a remote working arrangement, either in direct response to state and local regulations or as a way to keep non-essential employees safe.
Small business owners face the particular reality of running a business and managing employees from their home office. In addition to navigating a fully remote world of providing profitable products and services, small businesses must also develop ways to ensure ongoing compliance with the various federal, state, and local requirements needed to operate.
Traditionally, compliance has been viewed as a non-core, administrative function. In the age of COVID-19, however, it steps into the limelight as a way to ensure continuous operation and even profitability. Small business owners should adopt a strategy to ensure compliance throughout their company and support those initiatives with the techniques presented in this article.
The Basics of Legal Entity, Tax, and Licensing Compliance
In every state your company does business, it must maintain good standing with entity, tax, and licensing authorities. This generally allows the company to keep operating legally. It also preserves the limited liability protection of owners, officers, and directors. While every business faces unique requirements for its location or industry, most can expect to do the following in each state.
Maintain a Registered Agent for Service of Process
Business entities are required to appoint and maintain a registered agent in each state where they are registered. The registered agent receives important legal notices, such as service of process, on behalf of your business and forwards them to you with enough time to respond.
During the COVID-19 pandemic, it is especially important to know who your registered agents are. Most states allow you to designate any physical address, as long as it is not a P.O. Box or a virtual office. It is possible that your business’s publicly listed registered agent is currently its physical place of business. Of course, while you are busy running your business from your home office, it is equally likely that no one is at your usual address to fulfill the registered agent’s duties.
File Secretary of State Annual Reports
Your business is generally required to file an annual report with each state in which it has registered. Most states require business entities to file annually, though some have irregular due dates, such as every two or ten years. Secretary of state reports are information updates designed to keep your business’s public record current. They are also required to maintain good standing in that jurisdiction.
Unsurprisingly, you will encounter statutory deadlines that vary by state and even depend on the type of legal entity you have. This complexity increases when your business expands into multiple states, or when you manage a portfolio of companies.
File and Pay Tax Returns
In almost every state, your business will be required to pay taxes on its income, the sale of products and services, and other specific activities. Most tax accounts are administered separately, which means your business needs to register and file returns in each state, and often with multiple agencies within that state. In many places, like California and the District of Columbia, failure to maintain tax compliance impacts your corporate good standing and your ongoing right to do business.
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