These 5 tips are helpful whether you have a new business entity or an existing business entity.
1. Financial Accounts. Maintain a checking 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.
2. Tax Identification Number. Obtain and use a separate tax identification number (“TIN”) (in the US also called a federal employer identification number) for the business entity. Many 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 state-specified criteria, then a state-issued TIN may also be required.
3. 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 to determine which management or officer roles should be filled, who is authorized to sign documents and agreements for the business entity and how much independent authority has been granted to the business entity’s management and/or officers.
4. 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 buying, selling, leasing, financing, expanding, retracting, hiring, replacing or terminating, etc. It is recommended that the business memorialize major events with business records, such as meeting minutes or resolutions. A few examples of major events may include:
¨ Admittance or withdrawal of an interest owner
¨ Authorization for sale, lease or purchase of assets
¨ Authorization for new debt or modification of existing debt (e.g., change of repayment schedule)
¨ Approval of plans for business expansion, redirection, retraction or dissolution
¨ Change of management structure or responsibilities
¨ Hire, replace or terminate employees
¨ Change of financial institutions (i.e., bank accounts)
¨ Bring or defend a lawsuit
These meeting minutes or resolutions should be maintained in a similar way that confidential or private information is maintained by the business.
5. Annual Registration/Review. Many states in the US require that the owner of a business entity provide updated information, generally on an annual basis. This includes the current mailing addresses for the business and the in-state registered agent, as well as identification of the incumbent officers. Some states have 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 Secretary of State’s (or Department of State’s) website and are not redirected to a private vendor whenever you are providing private information on-line, especially a credit card number. Annually consult the business entity’s Articles of Organization / Incorporation, Operating Agreement, Bylaws, Partnership Agreement or other governing instruments and update them when appropriate.
Beth Jones, Esq. | Linkedin.com/in/beth-jones-atlanta | #tokn | email@example.com
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