Avoiding the risks of a good standing lapse in the US

To operate in the USA, your entity needs to remain in “good standing”; our US expert looks at some best practice to help you get there, and stay there.

Entity status is often overlooked, or spread out across multiple unrelated people and processes. However, staying in “good standing” is critical to keep your business on track.

Entity monitoring is the most effective way to head off status problems that can damage your business. Because state laws and requirements are all different, monitoring can be extremely complex. Make sure that you make use of specialists and automated tools to keep the process manageable.

Ultimately, the business owner is legally responsible for compliance and entity management. Whether that person is you, or the person you work for, it makes sense to have a true compliance partner to guide you.

A company’s best defence against compliance failures is to select a full-service registered agent and to fully leverage this partnership.

Avoid the risks by implementing best practices

  1. Monitor your entities: The best way to maintain good standing status is to monitor your entities. This means checking your entity information as it is listed on the state record in each jurisdiction in which you do business. Ideally, this check of public records should be done monthly. You need to set up procedures to alert responsible parties immediately so that they can quickly remedy the problem.
  2. Institute entity status change notifications: Businesses often delegate activities that impact entity status to different departments; annual report filings are handled by tax specialists, voluntary changes are handled by the legal or management teams, and so on. It is critical to create a real system to coordinate these teams so entity status can be managed and nothing falls through the cracks.
  3. Formalise state annual report filings: The most common reason that companies fall out of good standing is failure to file their state annual reports. Keeping track of annual report filings is difficult because each state has their own requirements and deadlines. You need to create work procedures that delineate each deadline, the requisite amount of taxes or fees to be paid, and the persons who are responsible for the forms and filings.
  4. Bring in expert help: Sophisticated online technology designed specifically for annual reports is available. If your business has multiple entities operating in multiple jurisdictions, it might make sense to outsource this process to a full-service commercial registered agent. Either way, it is important know when to consult outside help.
  5. Centralise a master compliance calendar: There is too much going on to run a compliance calendar off your email platform or, worse, residing on someone’s hard drive. You need to aggregate all your compliance filing due dates on one online calendar so all stakeholders are working together.
  6. Link to an entity records system: The calendar should link to a secure online entity management system where evidence of all filings and other documentation is stored. This system becomes the authoritative record of what companies you own and which jurisdictions to monitor. This system can also be used to communicate and verify voluntary status changes to ensure that they were recorded correctly by the state.
  7. Monitor state developments: Requirements change all the time. If you do not have your own government relations team, make sure that you leverage your registered agent’s ability to track new legislation and court decisions that can impact your business.

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