6 ITEMS: END-OF-THE-YEAR CHECKLIST FOR SMALL BUSINESSES
6 ITEMS: END-OF-THE-YEAR CHECKLIST FOR SMALL BUSINESSES
Where did the year go? We just entered the 4th quarter, and there’s already less than 3 months standing between us and the New Year! The last few months of the year can be hectic for most business owners as they scramble to drum-up new business and tie loose ends.
In addition, depending on your sales cycle, clients/customers can often check-out mentally and sometimes literally as the holiday season approaches. We’ve entered that period of the year where sales and demand will increase for some business owners while decreasing for others. No matter your sales cycle, it can be difficult to find time for planning and goal setting during the 4th quarter.
However, I strongly suggest that you start your count down to the end-of-the-year now because what you do during the 4th quarter will affect your 1st and 2nd quarter of the New Year. Give your business a fresh start for 2018 with this checklist of 6 essential items you should mark off before the close of the year.
1. Incorporate or Change Your Business Structure (including Foreign Qualifier)
Instead of formally incorporating right away, many entrepreneurs open their businesses as a sole proprietor or general partners because they simply want to get their business off the ground and running. However, without a formal business structure, you’re exposing your personal assets to legal risks and missing out on a number of tax advantages.
In some cases, you may have already incorporated your business, but your business operations have changed overtime. Now is the time to select a more suitable business structure that puts you in the best tax and financial position.
The key is selecting the right entity structure for your particular business. Work with a business law attorney and CPA to understand your options and the pros and cons of each entity.
Take a Closer Look: Find out how to choose the best entity structure for your business whether you’re a start-up or you’ve been in business for years: LLC or S-Corp – Which One is Best for My Business; Is 2017 the Year of the C-Corp Under Trump’s Tax Plan.
Foreign Qualification: Here’s a quick note for those who have expanded their business operations to another state. First, congratulations! Second, don’t forget that your LLC or corporation is only a domestic entity registered to do business in the state in which it’s incorporated. Therefore, you need to file for a foreign qualification to legally conduct business in another state.
2. File “Articles of Amendment”
For business owners who are already under the protection of a formal business structure, the 4th quarter is a good time to file Articles of Amendment with the Secretary of State if you’ve experienced some changes. Perhaps, you changed your business’ name, authorized more shares, changed the headquarters location, or assigned a different registered agent. As your business grows and evolves, the state requires that you file Articles of Amendment to maintain accurate corporate records.
3. Close (Dissolve) the Business that’s Inactive
I know a business owner who owns a marketing company. A couple of years before opening her marketing company, she created a list directory/social media company aimed at connecting faith-based organizations. Naturally, as time went on she only had enough time and resources to manage one of those companies at a time. The marketing company grew quickly while the other company sat quietly on the sidelines.
If you opened a business a few years ago that’s no longer operating, it just makes sense from a legal and financial standpoint to formally close the inactive business. To formally close (“dissolve”) your business, you’ll need to file Articles of Dissolution with the Secretary of State. Formally dissolving a business is especially a good idea if your business was operating as a Partnership. Articles of Dissolution will formally put the remaining partners on notice that they can no longer bind you to business contracts, debts or deals without your permission. In addition, you may need these articles as evidence in the future should someone try to sue you for a debt or agreement that occurred after you parted ways from your partners.
Take a Closer Look: Find out how to end your personal liability when one or more partners wants to leave or break-up the business – My Partner Wants to Leave – Now What?
Practically speaking, there’s no reason to continue paying annual renewal fees and unnecessary taxes to the state for an inactive business. Because the state still considers your business “active,” you’re still on the hook for these payments unless you formally close your business. Close the inactive business so that you can invest that money in the business you’re actually running.
4. Get Your Tax & Financial Paperwork in Order (Understand Your Financial Position)
The 4th quarter is the ideal time to start gathering your receipts, reports, mileage logs and tax documents in preparation for the upcoming tax deadline. You want to do this in advance of January so that you can get on your tax strategist’s or CPA’s calendar before they enter their busy season. Also, create a profit and loss statement (“P&S Statement”) to understand how your business performed this year. After reviewing your P&S Statement and tax documents, you may discover that some products and services should not be carried over into the New Year based on their profitability. You may also discover that you need to meet with a professional to avoid higher estimated tax payments that may affect your cash flow next year.
No one wants to start the New Year without sufficient cash on-hand to invest in tools, supplies, personnel, equipment, a new building or anything necessary to be profitable and continue growing.
5. Review Vendor Agreements
Typically, at least one person in most households is pretty vigilant about reviewing and renegotiating agreements that affect immediate household expenses. You can guess who that is at my house. If they notice a sizable jump on the cable, cell phone or utility bill, they’ll call the service provider and likely renegotiate a better price.
Entrepreneurs should be just as diligent about their business expenses. Due to economic and even weather changes, the price of fuel to ship your tractor supplies or ingredients to make your bestselling dish are always changing. The end-of-the-year is a perfect time to review your vendor agreements and third party contracts to evaluate whether you should renegotiate agreement terms or start shopping around for a new vendor.
6. Keep Calm and Celebrate!
Take time to reflect on and acknowledge the goals that you accomplished and the new opportunities you took advantage of this year. Celebrate those wins with employees, colleagues, family and/or friends. There’s little motivation about setting new goals for 2018 unless you’ve taken a moment to celebrate the benchmarks and milestones you’ve achieved this year.
One last thing — you’re not alone. Checklists aren’t useful unless we actually cross-off some items. In that same vein, you cannot cross items off a list if you don’t know how to accomplish the task at hand. Partnering with a knowledgeable and practical business lawyer can help you tackle those end-of-the-year items that leave you guessing or that you tend to put on the back-burner. At Brim Law Firm, we’re here to help you answer those lingering questions and mark of those items that are vital to your business’ success.
Your Thoughts: What’s the No. 1 year-end task that keeps you up late at night or that you tend to put off each year? Have you already begun setting your 2018 goals?
This article is intended to provide you with general information; it does not constitute any type of legal advice. For recommendations related to your specific matter, we encourage you to review our Practice Areas page for additional information and then contact us to discuss your company’s legal needs.