The Corporate Maintenance Checklist.
June 7, 2024
Proper Corporate Maintenance: The Business Owner's Checklist for Success
By: Melissa Balocca, Esq.
“Failure is not the only punishment for laziness; there is also the success of others.”
— Jules Renard, French Author
There are certain critical tasks that all corporations should perform in order to stay in good standing with federal and states authorities. Failure to maintain these items threatens the liability shield of your corporation and may result in penalties. In spite of this, many corporate owners find they don’t have time to effectively maintain their entities. As such, I am providing the following checklist in hopes of making the world of corporate maintenance just a little bit better.
1. Prepare and Timely Submit Required Reports and Filings.
Get organized on the following reports and filings: (i) initial filing of Form SI-550 Statement of Information with the California Secretary of State (due within 90-days of formation and annually thereafter), (ii) state tax returns for the California Franchise Tax Board, (iii) federal tax returns for the IRS, and (iv) reporting requirements under the Corporate Transparency Act (beneficial ownership report due date depends on date of formation).
2. Hold Annual Meetings of Shareholders and Directors.
Far too many business owners fail to maintain these basic requirements. Often, all that is required is a consistent date, time, and template to be completed and signed by the board of directors and shareholders (in small corporations, these positions are often held by the same individuals). Unfortunately, many owners let these formalities slip for years and it can be extremely expensive and time consuming to try to later perfect this issue. Do yourself a favor and get into the habit of holding your annual meetings or simply complete your annual resolutions by unanimous consent! Your future self will thank you.
3. Maintain Corporate Books and Records Annually.
Take time each year to update any organizational changes in the management or ownership of the business, including business address, agent for service of process (yourself or a third-party?), current directors (correct number of directors based on number of shareholders?), officers (rotating roles of CEO, CFO, Secretary?), and shareholders (any new investors?). Consider whether there have been any amendments to the name of corporation, the classes of stock, or shareholder agreements.
4. For Professional Corporations.
Confirm a current certificate of registration from the agency regulating the relevant profession. For example, a law corporation must renew its certificate of registration each year and submit an annual compliance report to the State Bar of California. A medical corporation must renew its fictitious name permit every two years with the Medical Board of California. Also, confirm that all shareholders, directors, officers, and employees are still licensed to provide the relevant professional services.
5. Review Buy-Sell Provisions Annually.
For corporations with a Buy-Sell Agreement in place (highly recommended), ensure that its terms remain consistent with shareholder objectives in light of the evolving nature of the corporation. For example, review the valuation formula use for pricing shares (often set annually), review insurance policy (current on premiums; sufficient value), and address any actual or anticipated life events such as marriage, divorce, disability, or retirement.
6. Other Matters to Consider.
Renew expiring licenses, permits, and certifications, renew existing fictitious business names, review any loan agreements to ensure compliance, review insurance policies such as general liability and workers compensation, and review any significant contracts with suppliers, vendors, or landlords.
I hope this article has been helpful and gets you thinking about the ways that you can provide some much-needed TLC to your corporation! Any questions on the Corporate Maintenance Checklist? Please reach out to Balocca Law at (310) 400-0743 or contact melissa@baloccalaw.com.
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