Tis the Season for Business Housekeeping
December 17, 2015
With the holidays approaching and a brand new Q1 around the corner, December is a great time to reflect on the past year’s successes and failures and to gauge the overall health of your business. A lot can happen to a business in a year, and making sure you are in compliance with new and changing license requirements will keep you ahead of the game for next year. The fact of the matter is, licensing and compliance can get complicated. Consider relying on an expert like Licenselogix that can help you handle the tough stuff while you focus on your passion – running a successful small business. Here are some questions to consider as 2015 comes to an end:
1. Did you begin transacting business in another state?
If you've started doing business in another state, you may need to register your business entity in that jurisdiction – a process is known as foreign qualification. In order to register you’ll likely need to file a ‘Certificate of Authority’ or ‘Authorization to Transact Business’ with the Secretary of State. You may also need to designate a Registered Agent and pay fees and taxes required by the new state.
2. Did you hire a new employee?
There are numerous steps to take to make sure you are compliant with federal and state regulations regarding new employees. You’ll almost always need to take care of payroll taxes by setting up a withholding tax account and a state unemployment tax account (SUTA). The required application process for each registration varies greatly from state to state. In addition, if you've hired an employee who lives in another state, you may need to foreign qualify and obtain any basic business license that the new state requires as well.
3. Did you begin selling a new product or service?
If so, your business may be required to collect sales tax on your new products or services. Sales tax is imposed on retail sales, leases, rentals of most goods, and on the performance of some services. Only a few states don’t collect sales tax (AK, DE, MT, NH, OR) – for most states, you’ll need a Sales Tax ID Number. At the local level, the US contains an estimated 11,000 sales tax jurisdictions, so you’ll need to obtain a local business tax certificate if the city or county in which you’re doing business requires it. And don’t forget licenses and permits for any regulated products or services you may be providing; food, drugs, cosmetics, tobacco products, and medical devices are just a few products that will most likely require specific licenses.
4. Have you opened a new business location?
A business that is expanding into other states will most likely need to apply for a Sales Tax ID at the state and local level. Additionally, you may need a basic business license in the new jurisdiction. If your business isn't “basic” per say, then there’s a chance you’ll need a more specified type of license. Different states, counties, and cities have different rules for registering and licensing different types of industries. Business such as healthcare organizations, general contractors, debt collection agencies, insurance agencies, charitable organizations, and tobacco companies all have their own specific licensing requirements. (This is definitely not an exhaustive list – it’s very much dependent on your industry.)
5. Did you close a location?
If you closed a business location this year, many states require that you actively withdraw your licenses, rather than simply letting them lapse. Officially dissolving an entity ensures that you’re no longer liable for taxes and filings associated with that business location. When closing a location, it’s important to settle any old tax balances or other debts with that jurisdiction so that you won’t get a call from a collector sometime down the road.
6. Did you change your ownership or officers?
When certain aspects of a business are changed, the changes need to be amended officially. In most instances, if you’re changing the ownership or officers of your business, you will need to notify state and local licensing agencies within a specific time frame – usually 30 days or so – but in some cases you’ll need to reapply for the business license altogether. When a corporation undergoes a change in ownership that affects the structure of the business (e.g., from Sole Proprietorship to LLC or Corporation), the new organization is required to register as a new sales vendor, and the former organization must file a final return and surrender its old sales tax permit.
7. Are all your business licenses active and in good standing?
It should be no surprise that the penalties for operating a business without the proper licenses can be severe, and companies that neglect their licenses can lose money and goodwill at the hands of higher powers. When multiple wings of your business maintain multiple licenses in multiple jurisdictions, you’re guaranteed to have a calendar littered with license renewal dates. Before the end of the year, do a little housekeeping to make sure that you have all of the licenses you need and that the licenses you do have are in good standing. It’s Q4 and there’s no better time to start planning ahead than right now, but you don’t have to do it alone. Consider consulting with an expert that can take over all of the license research, assembly, and filings that go along with running a successful business.