5 Tips for Business Entity Maintenance

A few of the many advantages of owning or working for a smaller business is the ability to quickly change direction as the marketplace indicates, to be versatile and to innovate.  Sometimes, however, these advantages can become disadvantages.  This often arises when a business needs to comply with governmental, legal or accounting requirements.  Larger organizations may have teams or departments staffed with knowledgeable individuals whose jobs are overseeing specific aspects of business operations or compliance.  Below are 5 tips to help, in part, with compliance.

You may notice that many of these tips flow from the concept of separateness.  That is regarding and understanding that the business entity is being separate from yourself, as the owner, manager, founder, etc.  This can be very challenging, especially if you are the sole owner, but doing so can help to set you on the path for compliance.

1. Memorializing Important Events.  Big or small, all businesses discuss performance and operations.  These discussions may be held in a formal, paneled conference room or over a causal coffee.  The point is, there should be a discussion of some sort if the business entity is making decisions about major or important events.  It is recommended that the business memorialize these decisions with business records, such as meeting minutes or resolutions.  Here are a few examples of major events that may flow from a change in the marketplace:

• Admittance or withdrawal of an interest owner
• Sale, lease or purchase of assets
• New debt or modification of existing debt (e.g., change of repayment schedule)
• Plans for business expansion, redirection, retraction or dissolution
• Change of management structure or responsibilities

These meeting minutes or resolutions should be maintained in a similar way that confidential or private information is maintained by the business.

2. Financial Accounts.  Maintain a checking or savings account in the name of the business entity.  Do not use any of your personal accounts for business matters.  All accounts receivable should be deposited into the business’s accounts.  Likewise, all business expenses/payments should be paid from the business’s accounts; this includes any employees’ salaries, overhead expenses, taxes or profits which are distributed to the owners of the business.
3. Tax Identification Number.  Obtain and use a separate tax identification number (“TIN”) (also called a federal employer identification number) for the business entity.  Many of your clients will require this TIN in order to issue payment for goods and services that the business is providing.  If the business hires employees or meets other criteria, then a Georgia-issued TIN may also be required and is recommended.
4. Signing Documents.  All documents, including leases and contracts, need to be signed by a proper officer or multiple proper officers.  For example, a limited liability company that is manager-managed might execute documents by one or more people who are “Manager” or “Managing Member”.  Consult the business entity’s Articles of Organization/Incorporation, Operating Agreement, Bylaws, Partnership Agreement or other governing instruments (the “Governing Instruments”) to determine:

• which management or officer roles should be filled,
• who is authorized to sign documents and agreements for the business entity,
• how much independent authority has been granted to management and/or officers, and
• what actions might require consent of the other investors or management.

5. Annual Registration/Review.  Georgia requires that business entities registered or formed in this state provide updated information, annually.  Georgia has modernized this process to allow for on-line annual registration and the use of a credit card for payment of the annual registration fee.  Note:  Make sure that you are on the actual Georgia Secretary of State’s website and are not redirected to another vendor whenever you are providing private information on-line, especially a credit card number.  Annually consult the business entity’s Governing Instruments and update them when appropriate.