Business Owners: How to Review Your Business to Avoid Problems

Each year, business owners should take some time away from their business operations to think about the big picture. It’s a great time to reflect on successes and challenges over the past year. It is also a great time to reflect on your recent accomplishments. Did you accomplish the items that were most important to you and your business, or did you focus on items that were “urgent” but not necessarily the most “important?”

Many of our business owner clients ask us whether there are standard tasks or items that need to be reviewed or addressed each year. Here are a few tasks and items we recommend every business owner consider.

1. Update Your Estate Plan

Estate planning and business planning often go hand-in-hand because, for many of our clients, a business represents their most valuable asset. If you have children, a business interest, investment real estate, a family cabin, or simply want to ensure that the administration of your affairs will be handled with minimal hassle after your death, then an estate plan is important for you. We recommend that you review your plan annually. If we can help with the preparation of or updates to your plan, we would be happy to assist you.

2. File Your Company’s Annual Business Renewal

Minnesota LLCs are required to file an annual renewal with the Minnesota Secretary of State. It’s free, and you can do it online: Minnesota LLC Yearly Renewal.

3. Update Your Company Records

There are operational and organizational steps, sometimes known as “company formalities,” that every business entity should adhere to in order for its shareholders, partners, or members to enjoy all the limited liability benefits afforded to the entity. Approving major company decisions and obligations undertaken on behalf of the company in the preceding year; ratifying director or governor action; and re-electing officers and directors/governors, are a few of the activities that can prove decisive if ever your company’s limited liability status was called into question. Keep company records up to date, and have a standard list of resolutions ready for each successive year.

4. Update Your Buy-Sell Agreement Valuations

Many buy-sell agreements contain provisions for an agreed-upon purchase price should a shareholder, partner, or member dissociate from the company (voluntarily or involuntarily) during the upcoming year. This is a very effective and cost efficient method to set the value for a departing interest holder. It’s set at a time when no shareholder, partner or member yet knows whether he or she will be on the purchaser or seller-end of the ownership transfer transaction. Most buy-sell agreements require a third-party appraisal (or, often, multiple third-party appraisals) if the agreed-upon valuation has not been updated within the past 12-15 months. Check your buy-sell agreement. Determine a purchase price if yours includes this helpful provision.

5. Review Your Employee Handbooks, Job Applications, and Employment Agreements

Each year different state and federal employment laws are enacted, revised, and interpreted by administrative agencies and court decisions. In addition, whether certain state and federal employment laws apply to your company will depend on the number of employees that you have. If you recently hired new employees, or reduced your workforce, the employment laws that apply to your company may have changed. In addition, a new law in Minnesota limits when an employer can inquire into an applicant’s criminal past. In order to ensure continued compliance with updates and changes to all employment laws, we recommend having an experienced employment law attorney review your company policies, procedures, employee handbook, and employment agreements. We frequently audit and prepare company policies, procedures, employee handbooks, and employment agreements and would be happy to work with you to keep your company up-to-date and following best practices and procedures.

6. Review Important Contracts and Leases for Renewal/Termination Requirements

If you have a renewal (or notice requirement to terminate) that will occur during 2014, make sure that you have added the deadline as an event on your personal and business calendars.

7. Use this Checklist to Avoid Common Problems Faced by Business Owners

We developed Audit Your Own Business: A Checklist to Avoid Common Legal Problems so you can save yourself money, anxiety, and time by your team spotting potential problems before they occur in your company.

8. Put Your Tax Deadlines on Your Company Calendar

Fox Tax provided this list of tax deadlines that should be on the calendar of whoever handles your finances:

  • January 15th: 4th Quarter Estimated Tax payments due
  • January 20th: Quarterly Sales Tax due
  • February 5th: Annual Sales Tax Report due (If you have a Minnesota tax ID number, you need to file online, even if you do not owe tax. You must report Use Tax on items purchased online.)
  • January 31st: If you have employees or subcontractors, W-2s and 1099s need to be printed and mailed to them
  • January 31st: Quarterly payroll reports due
  • March 17th: Corporate Tax Returns due
  • April 15th: Individual and Partnership returns due