Year-End Planning Tips For Businesses – Contracts and Commercial Law

If your business operates on a typical calendar year, once Q4
hits, you’re likely forming a checklist of things you need to
do to prepare for year-end. Beyond employee review scheduling,
holiday party planning, or goal setting for the upcoming year,
there are a myriad of administrative and financial responsibilities
for businesses. Whether you’re a solopreneur, LLC owner or a
corporate officer at a global corporation, consider these year-end
planning tips.

YEAR-END PLANNING: ADMINISTRATIVE AND REGULATORY FILINGS

Beyond preparing to file taxes, businesses must also ensure they
are being compliant with the federal government, their state of
formation, sector, and organizational documents depending on how
their organization was set up or possibly how it’s grown and
changed over the past business year. Here are some common
administrative duties and regulatory requirements filings that may
impact your business:

• Annual reports – while it’s widely
  known that publicly held companies must share an annual report with
  shareholders, stakeholders, and investors to showcase their
  financial position, most states also require businesses to file
  informational as well. In 2022, Pennsylvania lawmakers amended TITLE 15 OF THE PENNSYLVANIA CONSOLIDATED
  STATUTES, known as the “Associations Code,” now
  requiring all PA entities and all non-PA entities registered to do
  business in PA, both for profit and nonprofit, to file an annual
  report starting in 2025. The report will require:
  

  • The business entity name

  
  

  • The entity’s jurisdiction of formation

  
  

  • The name of at least one director, member, or partner

  
  

  • Names and titles of the principal officers, if any

  
  

  • The address of the principal office

  
  

  • The entity number issued by the Pennsylvania Department of
    State

While the filing fee is just $7 and free for nonprofits,
it’s not a task to overlook, as failure to file may involve
dissolution starting in 2027. Learn more about this new requirement.

• Entities doing business in a foreign
  jurisdiction – if you formed your corporation or LLC
  in one state but are now conducting business in another, you may
  need to register your business as a “foreign entity.” In
  short, your business will fill out a relatively short form applying
  for “authority” in that state and commit to state
  compliance once qualified, including but not limited to filing an
  annual report in that state, as well as maintaining a registered
  agent or REGISTERED OFFICE ADDRESS. If you are unsure
  whether or not you need this, connect with your business
  attorney.




• Changes to formation documents; records upkeep
  – did your corporation or nonprofit change officers? Did your
  business pivot and change its purpose or federal tax
  classification? Any time you are making changes to your
  organizational documents, you should follow the ratification
  protocols in your by-laws and ensure updates are properly
  documented. If you didn’t handle this when the change took
  place, year-end is a good time to do so. Keeping your documents
  current and keeping up with meeting minutes is a disciplined
  practice for NONPROFIT and for profit organizations. On a
  larger scale, maintaining a stock ledger keeps your organization
  compliant for federal tax purposes! Some organizations turn to a
  business attorney or law firm to help with corporate record keeping
  to ensure these documents are safe and current. Good recordkeeping
  goes a long way, especially down the road when considering possible
  M&A OPPORTUNITIES.

YEAR-END PLANNING: CONTRACTS, AGREEMENTS, INSURANCE AND
LICENSING

While the documents noted above are required from legal and
regulatory perspectives, other considerations for your business may
be subjective, but a good practice for year-end planning
nonetheless. If you haven’t already, take a closer look at:

• Contracts – obviously not all contracts
  expire on 12/31 each year, but some are annual and need to be
  renewed amidst the Q4 hustle and bustle. Contracts can govern
  tenancy, EMPLOYMENT, equipment, vendor relationships,
  software and licensing, IP and more. Reviewing these annually gives
  your business the opportunity to assess the effectiveness and terms
  of a relationship, and consider any changes you want or need made.
  Additionally, if you have a business loan, year-end is a good time
  to ensure you’ve met all lender requirements and are in
  compliance with your repayment obligations.




• Organizational documents – if your
  organization operates as some sort of partnership or was
  incorporated by co-founders, you should have AGREEMENTS IN PLACE – Buy-Sell
  Agreement, Operating Agreement, Partnership Agreement, etc.- to
  govern a multitude of things like salaries, ownership percentages,
  etc. Annually, owners may be required to agree on company value, so
  as to calculate the price of ownership interests if sold. Make sure
  any new owners or partners have signed joinder agreements to these
  original documents as well. While it’s unlikely these core
  documents will change often (except for valuations), especially as
  owners and partners age, it’s important to revisit transfer of
  ownership interests in the company should a founder pass away or
  become incapacitated to ensure operational continuity. Also, beyond
  ensuring you’ve updated and reviewed any corporate by-laws, be
  sure to abide by them as well, paying out required dividends or
  distributions, and documenting these transactions.




• Insurance and licensing – some
  businesses are required to operate with certain insurance policies,
  especially licensed professionals like accountants, dentists,
  engineers, or therapists. If you operate a business with multiple
  practitioners, be sure all licenses are current and in good
  standing, while also taking the time to review your liability
  insurance rates and plans. If part of your company’s Buy-Sell
  Agreement requires the company to buy ownership interests from the
  estate of a deceased owner, then it may also require the company to
  obtain life insurance on each owner, naming the company as the
  beneficiary. Be sure the life insurance policy fully covers the
  value of the ownership interest, as verified by an independent
  party, on an annual basis, perhaps at year-end.

YEAR-END PLANNING: BEYOND BUSINESS LAW

While businesses are governed by corporate law, they are also
impacted by several other areas of life, based on the relationships
and personal lives of the owners and officers. So, while these are
helpful year-end planning tips, also consider these other legal
ramifications:

• Family law – if you’re getting
  married in the next calendar year, take this time to establish a PRENUPTIAL AGREEMENT to protect your business
  ownership rights. Getting a divorce? Unless otherwise protected in
  a prenup, your business is part of your marital estate and will be
  part of the EQUITABLE DISTRIBUTION PROCESS.




• Estate law – while succession planning
  may already be covered in your Buy-Sell Agreement, family-run
  businesses may have other ownership transfer requirements or plans.
  If you developed a succession plan with your estate attorney that
  requires ownership transfers on an annual basis, take this year-end
  period to handle and document these transactions. Don’t have a
  succession plan for your business? Talk to an EXPERIENCED ESTATE ATTORNEY.




• Employment law – with so many RECENT EMPLOYMENT LAW CHANGES, be sure your
  company policies, procedures and handbooks address updates and
  trends like remote work, wellness, current wage and overtime
  regulations, privacy and more. Take some time to review these with
  your HR team or an employment law attorney to ensure legal
  compliance with new or updated laws.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.