Tips for Turning Entity Management & State Compliance into a Competitive Advantage

March 15, 2024

At a glance:

The main takeaway: Utilize a centralized compliance solution to simplify your regulatory processes and stay prepared for growth.
Impact on your business: A comprehensive platform for managing entities, tax registrations, licenses, and corporate records streamlines operations, helping businesses to adapt quickly to new opportunities.
Next steps: Contact Aprio to explore how a platform could simplify navigating complex regulations and prepare your organization for future expansion.

Schedule a consultation with Aprio’s Specialty Tax Services Team today.

The full story:

Regulatory obligations facing businesses continue to increase at a rapid pace. Multistate registrations and reporting are among the requirements businesses have to manage. Legacy processes are often not up to the task and commonly lead to operational and financial risk. Businesses need a modern solution that enables them to operate and grow while reducing regulatory risk.

This article delves into the functional areas of regulations affecting virtually all types of businesses and offers best practices for improving their workflows.

The Status Quo

What – Entity registrations, tax registrations, business licenses, and corporate records. Companies must track requirements, maintain filings, and report to company stakeholders.
Who – Various teams, including finance, legal, compliance, risk management and tax. Data is often siloed, leading to redundant work efforts and poor visibility. In many organizations, no one operates on a central dataset or single source of truth.
Where – In each jurisdiction that a company operates – Federal, state, and local levels. Secretaries of state, departments of revenue, licensing boards and financial control agencies all have unique requirements that must be met.
How – Manual and error-prone methods of tracking requirements and completing filings. Disparate systems include spreadsheets for data, files for licenses and applications, and calendars for due dates.
When – Continual, staggered due dates throughout the year. Monitoring new regulations and changes to existing ones is ongoing.

Maintaining Entity Registration and Good Standing

Maintaining good standing with the secretary of state is vital for business operations. At a high level, understanding where your entity is in good standing tells you where you can operate freely, access courts to enforce contracts, and retain limited liability protection.

By contrast, knowing when and where your entity has fallen out of good standing alerts you to potential risk areas and helps you take action to reduce expenses. It’s also vital for M&A deals, which generally can only proceed once your entity’s good standing is restored.

While spreadsheets seem like an acceptable option for tracking these statuses, they are user-generated, manually maintained, and present a version control risk. They can also be easily misplaced or overwritten, leading to data loss. A more robust, automated solution helps ensure the timely completion of annual reports to help protect your entity’s good standing.

Tip: Procure software that is integrated with the secretary of state agencies nationwide and automatically displays where your entities are registered and provides entity monitoring for good standing. Be sure this software handles new formations, foreign qualifications, annual reports, and other corporate lifecycle filings. Optimally, the company acting as a registered agent provides this software.

Applying For and Tracking Tax Registrations

Understanding where your business holds tax registrations is vital to maintaining smooth operations. South Dakota vs. Wayfair has led to an explosion in the number of sales & use tax registrations held by the average business. Remote employees have caused more businesses than ever to open payroll tax accounts in multiple states. Keeping track of these tax IDs helps practitioners reduce time wasted determining which tax registrations have yet to be completed.

Businesses often rely on their accountants and payroll providers to keep track of their Federal Employer Identification Numbers (FEIN), state payroll tax account numbers, and state and local sales tax IDs. This approach may work provided the business is experiencing status quo operations, but as soon as matters become more complicated, the system quickly breaks down. In a perfect world, extant tax registrations would be tracked in a centralized system that tax professionals can access directly.

Tip: Centralize all of your tax registration details in the same software that houses your entity registrations. Doing so helps your team operate in a single system of reference rather than working across multiple data sources to determine which tax registrations already exist and which still need to be obtained. Ideally, grant your tax professionals access to the system so they can quickly and easily collaborate with staff responsible for creating and maintaining entity registrations.

Obtaining and Renewing Business Licenses

As with tax and entity registrations, business license renewals are mission-critical. Having the proper licenses when and where you need them helps you to respond quickly to new business opportunities. Securing a business license is often required before marketing your services.

Having administrative staff manage them often seems like a sensible, cost-effective approach. However, they’ll inevitably fall back on spreadsheets and other homegrown solutions plagued by the same challenges outlined above. Since managing professional licenses often demands industry-specific expertise, they’re generally more challenging to maintain consistently. Flawlessly executing the license management process demands a purpose-built, tech-enabled solution designed to handle the needs of regulated businesses.

Tip: Implement a technology solution with premier project management software features like intuitive design, flexible task assignments, customizable email reminders, and robust status reporting. Confirm that the software can be configured to accommodate individual professional and firm licensing tasks. Confirm that it integrates seamlessly with your entity and tax management solutions to share required information securely and without friction. In a perfect world, the system should also keep track of changes to regulatory requirements that may impact the status of your licenses to guard against unforeseen lapses.

Maintaining Accurate Corporate Records

Keeping accurate corporate records supports all of the above operations. Providing copies of or sharing details from formation documents and supplying proof of good standing are common parts of creating new entity registrations, opening tax accounts, and applying for licensing.

Having a centralized location for these vital corporate records is paramount. However, many businesses store their records haphazardly and, even worse, insecurely. In a world of increasing risk of cybercrime, it’s more important than ever to have a secure system to store and easily reference your core business records.

Tip: Move your corporate records from physical file folders and disjointed databases into secure software. Be sure this software can store all your information and has mechanisms to collect updates as the information changes.

Benefits of Centralized Compliance

To stay ready for business growth and be able to respond to opportunities quickly, it’s important to work with a tech-enabled provider of compliance services. Such a provider can help you increase the efficiency of your operations and make them more resilient to changing requirements. The benefits include:

Save time researching requirements, tracking deadlines, and completing filings
Reduce risk when all teams run on a central source of truth
Unify business processes and do away with manual spreadsheets and legacy tracking systems
Replace and reduce costs by consolidating all compliance services with a single vendor
Grow and pursue opportunities with confidence knowing your organization is in compliance