By Eric D. Morton
When a corporation or a limited liability company is formed, various filings are made with the state and Federal governments. Employment Identification Numbers are obtained, statements of information filed, and notices of transaction submitted. However, once an entity is formed, the law requires that certain annual or bi-annual filings in order to maintain it.
The most obvious action is the filing of tax returns with the IRS and the Franchise Tax Board. These returns might be informational only for a S-corporation or a limited liability company but they must be filed. In addition, entities must also file quarterly and annual payroll reports. The failure to do so can result in serious penalties. We advise clients to have third parties prepare and file their payroll reports.
Corporations are required to have annual meetings of their shareholders and directors. Those meetings elect directors and appoint officers and approve the major actions of the year. They are also useful if the shareholders actually sit down and meet and review the year and their plans.
An often overlooked but important action is filing a Statement of Information with the California Secretary of State. Corporations must file a statement annually. Limited liability companies must do so bi-annually. Statements of information list the principal place of business, the officers, directors (or managers for LLCs) and the agent for service. If an entity does not file its statement of information, the state will suspend the entity and fine it $250. The Secretary of State sends a postcard every year to entities as a reminder but filing the statement is easy to forget. We advise clients to calendar their statement due dates.
Statements of information must be kept up to date so that the information about the entity is kept accurate. The public is legally entitled to rely on the information in the statement. If the agent for service moves, then the entity could be legally served at the old address.
If you would like more information about business entities and forming, maintaining and dissolving them, please contact us. We provide packages of services to form and maintain business entities.
Eric D. Morton is the principal attorney of Clear Sky Law Group. He can be reached at 760-722-6582, 510-556-0367 and emorton@clearskylaw.com.