(MORE!) New Year’s Resolutions for Businesses
- Review Business Ownership Agreements: Far too often, business owners do not have adequate LLC Operating Agreements or Corporate Shareholder Agreements that reflect the ownership and control of their business. If you have not had an attorney review and revise, as appropriate, your business ownership documents in the past few years, do so this year.
- Review and Consider Succession Planning: There has been much publicity lately about the incredible number of baby-boomer business owners (“BBBO”) that are nearing retirement age. Whether you are a BBBO or younger business owner, you must have a succession plan for how you will sell your business. Most likely, your business is one of your most valuable assets and if you do not have well defined plan on how to sell your business, you likely will not be able to fully obtain the maximum value.
- Review Contracts and Other Agreements: If your business does nothing else this New Year, with the assistance of legal counsel, every business should review its contracts and agreements with its vendors, suppliers, customers, lenders to ensure that it is operating in compliance with those agreements (and, importantly, that the agreements adequately protect the business). Non-compliance with agreements can lead to lawsuits by the other parties to the agreements or, even worse, termination of contracts/agreements that are important to the success of your business. Insufficient agreements can lead to lost opportunities or additional liabilities for your business. So, with this New Year, take the time to review all of your pending agreements. If you have any concerns, consult with your legal counsel as to the appropriate measures to take.
- Review/Update Insurance Coverage: Next, every business should review its insurance coverage. Adequate insurance coverage is one of the most important assets any business can have. Typically, this insurance includes property, casualty, liability, business interruption, directors and officers, cyber coverage (for IT related matters/data), workers compensation, employment practices liability insurance (“EPLI”), and fraud coverage and protection (note – depending on your business, you may have other specific requirements). Since business circumstances frequently change, businesses, together with their insurance professionals, should conduct a comprehensive review of their insurance coverage on a regular basis. And depending on the results of that review, update or otherwise revise their insurance coverage to meet their current needs and market conditions.
- Tax Planning: Needless to say, federal, state and local taxes are often among the largest expense and burden of any business. Yet without proper tax planning and professional advice, many businesses fail to take advantage of tax strategies and actions that could lawfully reduce their taxes. Therefore, every business should consult with a tax professional on a regular basis to determine how best to use the tax laws to minimize their tax burdens.
- Register as “Foreign Business Entity”: A corporation, limited liability company, or other form of business entity that is doing “business” in a state other than the one in which it was organized must register with that state as a “foreign business entity.” Whether a business is doing “business” in a state will depend on the laws of that state. Doing business in a state without so registering can result in significant financial and other penalties. Accordingly, as you start the New Year, all businesses should review their business operations to make sure they have registered as a foreign business in those states in which they are doing “business,” and if not, make the necessary filings as soon as possible.
- Annual Reports: A business entity is required to file annual (or, in some cases, bi-annual) reports both with the state in which it was organized (for example, the state in which a corporation was incorporated) and any other state(s) in which it is “doing business.” Businesses should, therefore, ensure that they have filed and completed all such required reports for prior years, as well as the current year. Since failure to file these reports for a number of years could result in the termination by law of your business entity, you should, with the advice and guidance of legal counsel, complete and file any delinquent reports with the appropriate state(s).
- Annual Meetings of Corporation’s Shareholders and Directors: A corporation’s Board of Directors and Shareholders are required to meet on an annual basis to, among other things, elect officers and directors for the upcoming year. In most cases, no actual meeting need be held and the necessary actions can be taken by a written consent signed by all of the directors and shareholders. Repeated failure to conduct such meetings either in person or by written consents can endanger the continued existence of the corporation. Thus, it is essential that such annual meetings be held or prepared and signed, as the case may be, in accordance with a corporation’s bylaws and the applicable law of the state in which it is incorporated. A thorough review of the corporation’s books and records should be undertaken to ensure that these meetings have been held or consent forms signed for all prior years. You should consult with legal counsel if there are any missing years as to the appropriate action to take.
- Make Sure You Have A Knowledgeable Business Counsel: You should have a capable and responsive business lawyer that you can consult and work with on these and a host of other business matters that may arise from time to time so as to avoid creating any unanticipated legal problems for your business. As it is said, “an ounce of prevention is worth a pound of cure.” And that is surely the case with the use of legal counsel to help you control and minimize the legal risks of your business.
The Corporate and Tax Counselor — Practical Counsel for Business
The Corporate and Tax Counselor is a monthly e-newsletter providing business owners and executives updates and PRACTICAL COUNSEL related to current business and tax law happenings. In each issue, we will highlight bottom-line implications and/or opportunities business owners/executives should consider in response to new laws, court and agency decisions, and other matters discussed in the newsletter.