08 Dec Ten New Year’s Resolutions for Your Business
Posted at 08:39h in Articles
Ten New Year’s Resolutions for Your Business
I realize it may be a little early to start talking about New Year’s Resolutions, especially for your business, but I am guessing some of you are feeling like me in that the sooner I can start thinking about 2021 the better.
One of the year-end/year-beginning projects that we discuss with our entity clients is that this is usually a good trigger time to run a quick check of your entity documents, appointments, registrations, obligations, etc. for your business, to ensure that all your records are up to date, complete and obligations fulfilled. Here is a short list of tasks that you should consider running through for your business and entity every year:
1. Hold an Annual Meeting of Owners and Governing Persons
A corporation is the only type of business entity that is required to hold an annual meeting, but all business entities can benefit from an annual meeting. Both the governing persons of an entity (the directors of a corporation, or the managers of a limited liability company) and the owners of the entity (the shareholders of a corporation, members of a limited liability company, or partners of a partnership) should hold a formal meeting or conduct the meeting via a Written Consent Action. The purpose of this meeting should be to approve and ratify the decisions made during the past year, fill any vacancies among the governing persons or the officers of the entity, and handle any other housekeeping items. The Bylaws or Governing Document of your entity may specify when and where the annual meeting must be held. If this date and time no longer fit with your business, then the appropriate document should be updated.
2. Update Your Officer and Governing Person Records
The records of your entity should reflect the correct names and addresses of the entity’s current officers and governing persons. These records can get out of date due to personnel changes, promotions, retirements, employee relocations, and other issues. You should review the corporate records and update the information where necessary. If any governing persons or officers need to be removed or appointed, this can be done at the annual meeting (see above).
The names and addresses of officers and governing persons are kept locally, in the entity’s records, until it is time to file the annual Franchise Tax Return with the Texas Comptroller. As part of that filing, you will have to file a Public Information Report with the Comptroller, which lists the current officers and governing persons.
3. Correct Your Addresses
You should ensure that the addresses of your entity on file with the State are current. The Secretary of State gets its address information from the annual Public Information Report, and the Comptroller gets its address information from the entity’s Certificate of Formation. If your entity’s address has changed, you should contact the Comptroller to manually update the address information.
4. Confirm Your Registered Agent
The Registered Agent of an entity is the person who receives all formal notices from the State, and all formal demands and lawsuits. Every Texas entity is required to have a Registered Agent located in Texas. The Comptroller’s website lists the Registered Agent of each entity, along with the Registered Agent’s address for notice. You should review and verify this information, and update the Secretary of State’s records where necessary, in order to not miss important documents.
5. Update the Child Support Division with Newly-Hired Employees
The Texas Attorney General’s Child Support Division (OAG-CSD) requires employers to register all employees, within 20 days of being hired, so that the TAG-CSG can properly withhold child support from their checks (if a withholding order exists). If any employees are not registered with the OACG-CSD, they should be registered as quickly as possible.
6. Review Your Governing Documents
The Bylaws or Operating Agreement of your entity should match the way you run your business. Take the time to review how it works – including ownership percentages, voting rights, restrictive covenants, and other issues. If any of these do not match your intent, or how you are running the business, then they should be revised and updated.
7. Review Your Employee Documents
Your employment agreements – including any offer letters, confidentiality and/or non-competition agreements, and employee handbooks are a key aspect of your relationship with your employees. However, the utility of these documents is very dependent on whether they’ve kept up with the growth of your business, and with changes in Texas employment law. Your employment agreements may contain “old” provisions that are no longer enforceable under current Texas law or just need to be updated to match your business operations.
8. Review Your Insurance Coverages
You should re-evaluate your entity’s insurance coverage on a regular basis, to make sure that the coverage matches your entity’s risks and assets. New lines of business, new types of risks, and changes to your operations are all important considerations in determining whether your insurance coverage remains sufficient to protect your entity.
9. Review Your Customer and Vendor Contracts
If your entity routinely enters into agreements with its customers or vendors using a standard contract form or a standard set of terms and conditions, then this contract language should be reviewed to ensure that it matches your current needs. Language dealing with payment schedules, warranty or service guarantees, and liability or indemnification (among other issues) should be revised as necessary to match your current course of conduct in dealing with customers or vendors. Updating this language can prevent problems and conflict with your business.
10. Agree Upon the Value of Your Business (If Applicable)
If your entity is subject to a buy-sell agreement or similar restrictive provision, it may ask for the equity owners of the entity to agree, on a regular basis, as to the value of the entity. This agreement can occur as part of the annual meeting or can be a stand-alone meeting of the members or shareholders of the entity. Once the value is determined, it should be written down and signed, in accordance with the terms of the relevant agreement.
Best wishes for a prosperous 2021!
ABOUT THE AUTHOR: Bradley W. Rapp is a Shareholder at Rapp & Krock, PC in the Business Transactions group.
Rapp & Krock, PC presents the information in this article for general education purposes only. Although this article discusses legal issues, it is not legal advice. The law and the content of any linked website may have changed since this article was written, and Rapp & Krock, PC makes no warranty or guarantee about the continuing accuracy of the information presented. Use of this article does not create an attorney-client relationship, and Rapp & Krock, PC does not represent you unless and until we are expressly retained in writing.
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