You created a corporation to protect your personal assets from business debts. There are certain steps you have to take each year to keep it in good standing. Otherwise, you lose that protection. Here are 5 things corporate shareholders should do every year to stay compliant.
You complete a short form - usually on the secretary of state website - and pay a fee. If you don't, the corporation is administratively dissolved and can't do business until reinstated.
| THE 'TO DO' | EXPLAINED |
|---|---|
| Annual Report | Most states require you to file a report each year comfirming the corporation is still active. You complete a short form - usually on the secretary of state website - and pay a fee. If you don't, the corporation is "administratively dissolved" and can't do business until reinstated. Some states, like New York, require reports every other year. Pennsylvania only requires them every 10 years, probably as a national apology from the Commonwealth for Philadelphia sports fans. |
| Beneficial Ownership Report | The US Department of Treasury requires most corporations to file a Beneficial Ownership Report listing holders of 25% or more of the voting stock as well as key decision makers. If the information on the initial report changes, you have 30 days to file an update. Make sure your BOR is up to date. |
| Annual Shareholders Meeting | Shareholders - even of single-stockholder corporations - have to meet every year. It doesn't have to be formal. Typically, the shareholders reappoint directors and review financials, but you can put anything on the agenda. Send a meeting notice if necessary. Keep minutes to document that it took place. Try not to spill beer on the minutes . . . because that's a waste of perfectly good beer. |
| Directors & Officers | Corporations must have one director, a president, and a secretary. One person can be all three. Make sure all positions are filled and you have documentation to show it. The directors can also create other offices, like vice presidents and a treasurer. |
| Cap Table | Your cap table should always be up to date. The secretary uses it to send meeting notices and process corporate records requests. Your accountant needs an accurate cap table to prepare tax returns. |