The Entity Upkeep Guide
 

This guide summarizes the most important things you need to do to maintain your LLC or Corporation (your "Company") and protect your limited liability status.
Every Company has its own unique needs and some steps may not be included in this article. 

 

 

BUSINESS FILINGS
 

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REGISTER ANY ADDITIONAL LICENSES AND PERMITS


1. Local Business License with the City - If you registered your company with us, we have already filed this for you or are coordinating this filing with you. This license is required for all businesses to legally operate. Generally, you must file annual income reports with the city and taxes may apply when your income reaches certain levels (i.e. over 100k). Below is the application for the Los Angeles Business license, though if your business is based in a different city such as Santa Monica or Pasadena, a different registration may apply. If you did not form your entity with us and need to file this, you can register for free with Los Angeles below: 

2. California Seller's Permit - This is a tax registration that is required only if you sell tangible goods in California. It is not required for service only businesses or for digital products. If applicable, we recommend you coordinate this filing with your accountant or register below and follow the corresponding instructions: 

3. Los Angeles County DBA - This is required only if you are "doing business as" a name different than the legal name of your entity. For example, if your LLC is called "Traction Enterprises LLC" but your business is called "Purple Salt Beauty Supplies", then you would need a DBA for your business name. However, if your LLC name and business name are the same then a DBA is not required. If applicable, register your DBA(s) in Los Angeles County below and follow the corresponding instructions. We are happy to help as needed.

4. Statement of Information -  You will need to re-file your statement of information with the Secretary of State every year for Corporations and every two years for LLCs. If you registered your entity with us, then we have taken care of the first filing for you. File your annual or bi-annual statement of information below as needed and follow the corresponding instructions: 

5. Other Licenses and Permits - Every business is unique and certain businesses require additional licenses, permits, or regulatory compliance. For example, if you sell alcohol, food, pharmaceuticals, or operate a brick and mortar shop additional compliance may be required. Check with city, county, state, and federal agencies for applicable permits and compliance measures. We are happy to assist. 

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AVOID SCAMS! 

  • As a registered Company, you will get a lot of scam letters in the mail that may appear as though they are from the government. A common scam is a letter from the "CORPORATE COMPLIANCE CENTER." Generally, they will ask you to file some unnecessary papers along with a filing fee. Double check to see whether the papers are endorsed by any government entity. Often they are not. If you are unsure whether compliance is necessary, consult with your attorney.

 

FINANCES & TAXES

 

FINANCE MANAGEMENT

  • Bank Account: Open a separate bank account for your Company. You will need to bring your EIN and stamped Articles to the bank to open this account.

  • Separate Finances: Keep your business and personal finances separate. You can pay yourself from the business, but do not use the business bank account for non-business related expenses. It is ok to invest personal money into the business, but document it as a loan or investment in the company. Check with your accountant about how to manage finances.

  • Protect Your Limited Liability: If you co-mingle business and personal finances, it may damage your limited liability status.

 
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PAYING TAXES

Consult with an accountant to ensure you are in full compliance with all tax requirements and take advantage of all tax benefits available. There are deadlines, so be sure to coordinate with an accountant as soon as possible. 

  • Local Business License: As noted above, many cities require that you register your business with the city and pay any applicable taxes.

  • State: California has a minimum annual franchise tax of $800 per year. This amount becomes due approximately 3.5 months after you register your entity, and then annually thereafter. If your Company is a Corporation, this fee may be waived for the first calendar year.

  • Federal: Your Company will also need to file federal tax returns with the IRS. Coordinate with your accountant to complete all filings properly and on time.

 
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TAX ELECTIONS

Consult with your accountant about any tax elections that may help you save money on taxes. They may recommend one or more of the following:

  • S-Corp Election: Whether you are a Corporation or LLC, your entity can be taxed as an S-Corp for federal and state tax purposes. We generally do not file these tax elections as part of the formation and recommend you coordinate the filing with your accountant.

  • 83(b) Election: Depending on the nature of your ownership, receiving vesting equity may be a taxable event. This election may reduce your tax burden by having this taxable event occur now, rather than later when your company is worth more money.
    THERE IS A 30 DAY DEADLINE TO FILE THIS ELECTION AFTER YOU RECEIVE YOUR EQUITY (i.e. sign an equity grant or operating agreement)

 

USE & LEGITIMIZE YOUR COMPANY

 

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LET PEOPLE KNOW WHO THEY'RE DEALING WITH

Let the world know that they are engaging with you as a Company, not you as an individual. This is an important step in maintaining your limited liability status. 

  • Contracts: When engaging in contracts related to your business, make sure your Company is the party to the contract, not you as an individual, and be sure to write the full name of your Company to make sure it is clear in the contract. For example, if your business is registered in California and called Awesome Creatives LLC, then you should identify it as “Awesome Creatives LLC, a California limited liability company” in the contract. If you just put Awesome Creatives in the contract, that is not clear that its an LLC and you could end up personally liable on the contract.

  • Website: Use your full Company name in your website footer, terms of services, and privacy policy, and identify that it is a California Corporation or Limited Liability Company as applicable.

  • E-mails: Similarly, include your Company name in your e-mail signature line.

 

MEETINGS & MINUTES

  • If you are a corporation, at least once a year you should host a meeting with the owners of your business and keep minutes summarizing what was discussed -- even if you're the sole owner of the business having meetings by yourself. LLCs do not need to abide by this requirement.

  • Keep all of your Company documents organized together in a safe place (i.e. a corporate kit or binder) and create secured online digital back-up copies as well. Use Company letterhead and label documents appropriately. None of this needs to be filed anywhere, but it helps protect your limited liability status by legitimizing your Company.