Attention small business owners! You’ve probably been given the advice to form an LLC to help keep you protected. While this is solid information, in order to maintain this protection follow these 4 simple steps as part of your LLC annual checklist to help keep your business in good standing and your assets protected.
- Maintain complete formation of the company with all necessary the supporting documents
- Have an annual meeting and record the notes
- Renew your LLC entity with the proper state authority
- File all necessary state and federal tax filings
If you’re at the beginning stage of your business, check out this article on which state is best to form your LLC. I also encourage you to download my free e-book which goes over the 6 steps of business formation.
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If you already own an LLC, then let’s dive into each of these 4 must-dos as part of your LLC annual checklist.
1. Keeping records for your LLC
While you created some paperwork when the LLC was formed, that’s only the start of your LLC records. Detailed records should include your Articles of Organization (filed with your state), an operating agreement between owners/members, organizational resolution for owners/members, an organized folder or book to keep all your records, and your EIN letter.
You can keep all these documents electronically in a backed up folder or on a secure cloud like Google drive. Just make sure to be organized and ready to show any of them should anything be questioned. They are also important for a lawsuit to help separate you from your business.
2. Recording an annual meeting
As a formal entity, you should have meetings as part of your LLC annual checklist. What does this look like?
If you have multiple members, you need to meet, whether in person or virtually, and discuss the business. Depending on what works for you this can be monthly, quarterly or possibly as seldom as annually. This is a great time to discuss goals, go over your financial numbers and talk about the overall health and direction of the LLC. These are all items that are critical to the success of any business.
If you are a solopreneur, then sit down and go over the health of your business with yourself. Write down your goals for the year or the quarter. Write down things you’ve failed at over the past year or quarter or things that have been successful. It’s really a great time to reflect on your business and the direction it is moving. If it’s helpful, ask a friend or partner to sit down with you and discuss these key points. I’m sure you already understand the importance of having support as a solopreneur. So take advantage of those entrepreneur bonds!
Whatever your method to keep details about your business, your goal in keeping good records is to strengthen asset protection, record your goals and direction of the business, and in the end increase communication between business owners. It’s also a great way to get family members involved in the business and to brainstorm business growth, work on some tax planning and establish processes to keep your business healthy in the long run.
3. Keeping your LLC in good standing
While every state is different, the majority of states require an annual report and/or fee to stay in ‘good standing’. If you fail to do this, the state can terminate your entity. Sometimes you can receive email reminders to complete the annual report, but many times a termination is unknown to you, the business owner.
In addition, some states have large penalties for failure to file an annual report. You don’t want extra costs and headaches, right?
I urge you to put reminders on your calendar and make sure you stay on top of any required filings for your state.
Let’s take a look at an example of a popular full-time RV domicile state, Florida.
Florida has an annual report filing which is due by May 1st. It costs between $61 – $500 depending on entity type to file this report. Add this into your annual costs of doing business because it’s unavoidable.
However, they also have a large penalty for failing to file by that May 1st deadline. It is $400!
If you fail to file by September, your company will be automatically dissolved. Straight from the Florida Department of State website,
If you do not file an annual report by the third Friday of September, your business entity will be administratively dissolved or revoked in our records at the close of business on the fourth Friday of September. (Chapters 607, 617 and 620, F.S.)
Administratively dissolved or revoked entities may be reinstated, but it requires submitting a reinstatement application and paying all associated fees (the reinstatement fee + annual report fees due) at the time of submission.
As you can see from this, it’s important to stay on top of the deadline for whichever state is the home for your business. Put it on the calendar. Create reminders. Do whatever you need to do to make sure you meet the deadline and filing requirement.
4. Filing the proper tax filings
The last part of your LLC annual checklist is concerned with taxes. Tax filings depend on your business entity and treatment. The following are some tax filings that your business might be required to submit. Talk to your tax professional to know exactly which ones your exact situation requires.
- A single member LLC, sole proprietor or solopreneur, file a Schedule C or a Schedule E for rental property with your individual tax return.
- A multi-member LLC treated as a partnership by default needs to file a Form 1065 or Partnership Tax Return.
- A single or multi-member LLC treated as an S-Corp needs to file a Form 1120S or S-Corp Tax Return.
This is where it’s important to know the rules of your state. There are different requirements for the different treatments of LLC. So be sure to know if your state requires a return for your business entity. Many LLCs are pass-through entities, so the earnings will show up your personal return. However, your state may require you to file an S-Corp or partnership return.
Many states also have a franchise or business tax. For example, Texas has a franchise tax. Washington has a business and occupation tax. Again, it’s super important to be aware of the requirements in your state.
If you’re selling a physical product or possibly even a service in some states, you are going to need to report your sales tax earnings and remit a payment. Make sure you understand sales tax rules for any state in which you operate and if they apply to you and your operation. Check out this article for help in understanding sales tax as a business owner.
If your company runs payroll, make sure to keep up with the necessary filings for your company. Many times payroll processors will keep you in compliance or at the very least give you reminders to file and pay your payroll taxes. This is super important though and if neglected can result in large penalties and interest owed.
Lastly, enjoy your LLC and the incredible opportunity it gives you to live and work on the road, be your own boss and be flexible with your time! I simply urge you to make sure you understand your responsibilities as the owner of an awesome LLC and hope this LLC annual checklist provided some guidance for you, as a small business owner.
What’s the one thing that’s holding you back with your LLC?