The Premier Corporate Compliance Attorney in Sacramento & Northern California
There are hundreds of laws, statutes, and regulations around starting a corporation in California, and then operating it on a continuous basis. Right at the start, many business owners must decide between forming a corporation or a limited liability company (LLC). There are pros and cons to both decisions; but both paths come with specific requirements that you must meet in order to remain compliant with applicable state laws.
If tax law is not one of your core competencies, then it can be all but impossible to keep the many corporate rules and regulations straight. However, there is professional help available. Brian Coggins has decades of experience as a tax accountant and lawyer, and he can help you navigate the myriad laws on corporate compliance for your business. That way you can avoid any and all non-compliance penalties, whether it’s a $250 fee for failure to file a Statement of Information, or a much more serious fine.
Compliance Requirements for California Corporations
Corporations have the strictest compliance requirements under California law. In order to remain legally compliant as a corporation, you must have the following items in order:
- Taxes, fees, and Statement of Information. All corporations must file a Statement of Information on a yearly basis. (A Statement of Information is a record of the company’s business activities over the past year.) They are also required to pay a franchise tax after their first year in business. If the corporation has employees, it must obtain an employer identification number (EIN) from the IRS, which is also required in order to open a business bank account.
- Corporate records. Corporations are required to hold initial and annual meetings with the director and shareholders. The content of these meetings (or meeting minutes) must be kept in the company records. In addition, corporations are required to develop, maintain, and enforce company bylaws.
- Business licenses. No matter how big or small a corporation is, it must file for certain licenses from the state of California in order to remain legally compliant. This is true regardless of the type of business or industry in which the corporation operates.
Compliance Requirements for California LLCs
While the compliance requirements for LLCs are not as strict as those associated with corporations, these business entities still must follow certain guidelines in order to avoid non-compliance penalties. For example, the tax and license requirements for an LLC are basically the same as those for corporations; and both LLCs and corporations are required to file an annual Statement of Information. The biggest difference between an LLC and a corporation is that an LLC is not required to record meeting minutes, or develop and maintain company bylaws.
If you fail to meet the minimum requirements associated with LLC compliance, then you could forfeit the “limited liability” protection that such an entity affords its owners. The key is to understand and observe all the basic compliance regulations for your company, whether it’s a corporate or an LLC.
At Coggins Law, our team has extensive experience in corporate and tax law. We’ve helped many clients to become (and stay) compliant with corporate requirements, and thus avoid the serious financial ramifications of non-compliance. For instance, we can conduct a comprehensive contract review to ensure that you remain compliant in terms of any business transaction.
Consequences of Non-Compliance
There are many potential consequences that come with non-compliance, all of them negative. For instance, if your business is sued by a customer or employee and you’re unable to demonstrate that you meet all of the state requirements for an LLC or corporation, then your business may be classified as a sole proprietorship or partnership. That means your personal assets will be vulnerable to seizure if you lose the lawsuit.
In addition, if your company is not in “good standing” with the state, then you may be subject to an array of late fees, interest payments on your taxes, and other fines.
If you are facing a compliance review, or simply want to ensure that you remain compliant with the state, then let our team of legal experts at Coggins Law help. Contact us today for a free consultation.