One of the most costly things business owners can do – often through benign neglect – is allow their company to lose its good standing with the state where it operates. When this happens, a company can be administratively “dissolved” and owners can lose the personal liability protection of a corporation or LLC.
Here are the six mistakes business owners need to avoid to keep their company in good standing:
1. Neglecting to file the proper paperwork with the state. Alabama and Ohio are the only two states that do not require owners of a LLC or corporation to file an annual report. You can download the proper form on your state’s secretary of state office website and find out when it is due each year. In addition, any changes to your LLC or corporation will require you to file an Articles of Amendment form.
2. Mixing personal and business finances. Owners of sole proprietorship that later become LLCs or corporations may make the grievous error of continuing to use their personal bank accounts or credit cards for their business. Doing this will nullify the personal liability protections of a LLC or corporation, so be sure you maintain separate accounts for business and personal use.
3. Not using the proper business name to sign contracts. You need to use the exact name of the company as it appears on your business formation documents you filed with the state in contracts or on official forms.
4. Letting registered agent status lapse. If you operate your business from home, you may be using a registered agent as your official business address. If you fail to pay the Registered Agent fees and the agent ceases to represent your company – or you forget to update your address of record – you could be placed in bad standing.
5. Not obtaining a DBA for name variations. If you plan to operate your company under a variation of your official company name, you need to file a DBA (Doing Business As) or you could be found to be operating improperly by the state.
6. Operating improperly in another state. If you open a new office or conduct business in another state, you will need to get permission from that state by filing for a “foreign qualification”. Without it, you will lose the personal liability protection of your LLC or corporation in the new state.
To learn more about maintaining business viability through skillful business planning, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.