By Andy Tiwari
The end of the year can be a challenging time for many small businesses owners. They often are juggling existing clients while trying to position the business for the following year. Here are three items often overlooked to keep as priorities to start the year off right.
An entrepreneur should document meeting minutes and close out lingering contracts. If you’ve been procrastinating on the idea of ending an unsuccessful business, now might also be an opportune time to finalize that painful decision.
Correctly documenting meeting minutes is frequently overlooked but necessary to maintain proper corporate records. While you can’t necessarily “make up” for failing to document important decisions at the time they were made, it’s possible to “catch up” on some of the business’s actions by holding a quarterly or annual meeting. Depending on the type of business entity, this meeting might be held by the directors, managers, shareholders, members, or partners. For single-owner companies, or where meetings aren’t feasible, a “consent” explaining the action taken can be used instead.
Meeting minutes should be signed by attendees and detail any actions taken, any plans that were laid out, or who voted for or abstained from a decision. Consents should contain the same information and be signed by the company’s decision makers. These records don’t have to be complex; often, all you need is a set of bullet points documenting important actions. In many instances, minutes can be prepared, emailed, and separately signed by the appropriate parties.
While Texas law is fairly forgiving when it comes to corporate recordkeeping (in many cases, small companies aren’t technically required to record meeting minutes), these signed documents go a long way in demonstrating that a company is distinct from its owners. This is important protection against “piercing the corporate veil” claims, a technique used to directly sue a business owner instead of his or her company.
One of the last things business owners find time for is tackling unnecessary contracts. For example, marketers know that consumers and business owners alike are more likely to continue paying a monthly or annual fee for a service they don’t need than they are to take the effort to cancel it. Many business owners carry more phone lines than they actually use, credit lines they pay fees for but may not access, or even ongoing but ineffective and costly marketing. Business owners would be wise to set a goal of reviewing existing contracts and the business’ needs to see if closing a contract makes sense. Ending a contract also helps with budgeting for what’s ahead. Always review the contract language first to make sure that a cancellation won’t result in a penalty.
But what if the business just isn’t working? The decision to liquidate a business is often extremely difficult – particularly for the business owner who has spent many hours and financial resources launching it. Tenacity and constructive optimism are key, but smart entrepreneurs know when to “throw in the towel” and move on. If you started a business that never really “took off” consider closing it so you are not stuck with additional expenses or even possible penalties for failing to file necessary documents.
Just as you create a business plan, create an “end of business plan.” Consult with a tax advisor and legal counsel regarding strategies to sell the business or wind the business down. If done early, the closure could still qualify for the prior tax year, a possible benefit. You will also need to notify any suppliers or vendors you worked with, settle all debts (or plan for the consequences of not doing so) and “close” your employer records with the IRS. If you had employees, you will also need to make sure final checks are cut, taxes are paid and that you comply with employment labor laws. If you filed a business entity, consult with legal counsel about whether terminating the entity’s existence makes sense.
Starting the year on the right path can seem daunting, but crossing some of the above items off of your checklist and even closing your “good idea” will position you and your business for a successful year.
If you need legal advice, schedule a meeting with Tiwari + Bell PLLC through our website or by calling (210) 417-4167.