This post was originally published on Dec. 12, 2014, and was updated on Nov. 12, 2019.
The years move by quickly when you’re a small business owner. Blink on January 1, right after you’ve made your entrepreneurial New Year’s resolutions, and before you know it, it’s Q4 and the end of the year all over again.
Entrepreneurs often multitask their way through Q4. They prep their business for the first quarter of the new year, celebrate the winter holidays with their team, and file required documents to remain in good standing with the state.
4 business filings to handle before the end of the year
Which types of paperwork do small businesses need to file before the year ends? Here’s a look at a few common documents and reports startups must file to stay in compliance.
- Annual reports.
- Delayed filings.
- Articles of dissolution.
- Reinstatement filing.
Let’s look at each of these important year-end business filings in more detail.
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1. Annual reports
Filing an annual report is due — you guessed it — annually with your local Secretary of State.
Is an annual report the same as an initial report? Not at all.
An initial report, sometimes called a statement of information, is filed when a small business owner first incorporates or forms a limited liability company (LLC).
Initial reports share basic information about the business and its activities with the state. This information includes the name and address of the business, addresses of its members, the name and address of the company’s registered agent, and a brief description of what the company does.
Annual reports, on the other hand, record any changes the business may have experienced throughout the year.
This includes updating any changes made to the business name and/or address, member addresses, changes in registered agents, or drastic alterations to business activities.
You may submit an annual report that reflects many changes made to the business throughout the course of the year, or the report may only note a few changes.
When is my annual report due? This is a great question because due dates vary depending on the state you do business in.
Your legal formation, from an LLC to an LP, also reflects the frequency in which your annual report filing is due.
For example, if you have incorporated in the state of Alabama as an LLC and do business in that state, your annual report is due each year. However, if you incorporated as an LLC in Idaho and do business in Idaho, your annual report is due on a biennial basis, that is, every other year.
The best way to avoid any confusion about annual report filings is to contact your local Secretary of State.
They will be able to provide you more information about your annual report filing requirements. You may also find it helpful to refer to MyCorporation’s “cheat sheet” of annual report due dates, updated to reflect the current deadlines for all 50 states.
2. Delayed filings
In general, I recommend that anyone starting a business forms an LLC or incorporates as soon as possible.
However, what happens if you plan on opening your doors for business in November or December? Should you still move ahead and incorporate the business in the few remaining calendar months of the year? Or is it more beneficial to opt for a delayed filing instead?
Typically when a small business owner decides to form an LLC or corporation, the process begins as soon as they submit their application form and pay a filing fee. However, one should not expect that their effective date of incorporation will be the day after they filed the paperwork.
As a result, it may be difficult to predict the exact date you are officially in business.
A delayed filing, on the other hand, delays the effective date of incorporation. This allows entrepreneurs to file their incorporation paperwork 30 to 90 days in advance and set an exact start date for the business.
More often than not, small business owners will choose to set their start date in the next calendar year. Why would they choose to put it off until next year instead of opening their doors right now?
Once you are considered to be “active” as a business by the state, you are required by the IRS to collect, report and pay taxes for that tax year. This is true of businesses that have only been active for two months.
A delayed filing allows you to avoid paying taxes for two (or less) months in business within that calendar year.
It also ensures you do not pay other fees associated with starting your business, like annual report fees.
Set a specific start date
If you’re sticking to a strict timeline for opening up shop, a standard incorporation filing does not guarantee the business will be active within that timeline.
A delayed filing helps guarantee a specific incorporation date for the business.
You’ll know when you’ll officially be in business, and will be able to set the wheels in motion towards preparing for that exact date.
Delayed filings are prioritized
Concerned that your delayed filing may get tossed into a backlog somewhere? Don’t worry!
This ensures that the state will be able to address and approve delayed filings quickly without you wondering when — and if — they’ll get to your paperwork.
Get a head start elsewhere
Does your small business still need to file for an employer identification number (EIN) or a business license?
Opting for a delayed filing gives you a good sense of when your business will be officially active.
Use the extra time to get the rest of your ducks in a row. Some of these may include but aren’t limited to obtaining EINs, business licenses and permits, getting a lease on a retail space and opening a business bank account.
Related: How to get a business license
3. Articles of dissolution
There are many reasons why a small business may file for a dissolution, and not every reason is negative. Some businesses voluntarily dissolve because they have simply run their course or the owner has decided to pursue another venture.
Once you know you are ready to shut your doors for good, small business owners cannot simply hang up a “closed” sign and walk away from the storefront.
This is a formal closure of the business, which alerts the state that the business is no longer active. As such, the company will no longer be required to file annual reports or continue paying state fees and taxes.
How does a small business owner file a dissolution? Here’s a quick primer for steps to follow in dissolving a business.
1. Secure the vote
Let’s say your business was a corporation. Corporations have a board of directors. That board must be able to approve decisions made by the company.
Before dissolving the business, you would need to meet with the board of directors and take a vote to pass the dissolution.
This vote must be approved by a majority of shareholders. Otherwise, the business will not be able to dissolve.
For LLCs, a formal meeting must be held with the LLC members to approve dissolution.
The one entity that would not need to have a formal meeting or conduct a vote is a sole proprietorship. This is because a sole proprietor conducts business as an individual. Hence, they would be able to dissolve their business without requesting a meeting or vote.
2. File articles of dissolution
This is an application that announces the intent to dissolve the business.
You must include the name of the corporation or LLC, the date the dissolution will go into effect, and the reason for dissolving the company. Are you registered to do business in another state? If so, file an application of withdrawal in that state. This ensures that the business is no longer considered active in another state or responsible for filing annual reports and paying state fees.
3. File Form 966, Corporate Dissolution or Liquidation
Let’s go back to the corporation example. If your corporation was able to secure a majority vote in favor of dissolving the business, it would need to file Form 966 within 30 days of filing articles of dissolution.
4. Cancel business licenses
Small business owners must cancel all business licenses and permits issued to their business.
5. Notify employees
Do you have a staff of full-time employees? You must inform them that the business is in the process of being dissolved as soon as possible.
Make sure you account for their W-4 state and federal withholding and provide each employee with information about the date they will receive their final paychecks, among other important information.
6. Pay off remaining business debts
Once the remaining debts of your business have been paid, the owners can liquidate and distribute the remaining assets to members and shareholders within the business.
Last but not least, take the time to review the “Closing a Business Checklist” provided by the IRS. This list provides additional actions small business owners must take before they close their doors for good.
Remember to file an annual report for the year you go out of business, file final employment tax returns for any employees you may have, and make final federal tax deposits.
Depending on the entity your small business incorporated as, you may also need to report the shares of partners and shareholders, allow for S Corporation election termination, and file final employee pension and benefit plan documentation.
Links throughout the checklist will help guide small business owners to the appropriate PDF forms to fill out and file.
However, filing a dissolution is necessary before the year is up. This ensures your business avoids paying next year’s fees and filing annual reports for a business that is no longer considered to be active in the eyes of the state.
4. Reinstatement filing
Sometimes a business accidentally falls into dissolution. This may happen if you forget to submit your annual report or have a check bounce on filing fees.
We all make mistakes, and the good news is that an involuntarily dissolved small business doesn’t need to remain so.
If you find that your business was involuntarily dissolved this year, you may file a reinstatement to reinstate the business before the year ends.
Much like dissolving a business, reinstating a business comes with a few steps.
1. Determine why the business fell out of good standing
One of the examples listed above might be the reason. However, if you don’t know what happened, contact your local Secretary of State to find out why you were dissolved.
2. File reinstatement forms with your respective state
Depending on the reason why you fell into bad standing, a reinstatement application could be accompanied by another document such as a delinquent form. If you are unsure of which forms to file, reach out to your Secretary of State.
In addition to providing more information about how your business fell out of compliance, they may provide a list of necessary forms to file to ensure you do not forget anything.
3. Pay any outstanding fees associated with your business
Generally, you’ll need to pay a reinstatement form filing fee. However, there may be other penalty fees associated with your business.
Once these have all been paid and your application has been approved, you may successfully reinstate your small business.
Head into the New Year knowing you have your small business back in good shape and the peace of mind of being back in compliance with the state once more.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.