Entity management can be challenging for businesses juggling multiple deadlines and regulations, as well as new compliance requirements. Your business has to comply with federal, state, and local obligations to effectively manage legal entity compliance risks and maintain good legal standing. And amidst the ongoing responsibilities of entity management and compliance, you must still be attentive to other happenings across the business.
As the regulatory landscape evolves, having a plan to streamline your entity management and compliance processes will be invaluable. With a solid strategy, your company can save time and resources that can be reallocated to other important business objectives.
In our recent webinar, Streamlining Entity Management and Compliance in 2023, our panelists discussed how to identify and avoid common compliance risks. Plus, they shared best practices for using technology to manage and track compliance deadlines and ultimately simplify entity management.
Watch the on-demand webinar now. Or, keep reading for an overview of our conversation featuring Mike Hudson of CCS Legal and Mark Prestipino of The MFO Group.
Common Causes of Legal Entity Compliance Risks
Legal entities of all types and sizes, including Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), and non-profit and for-profit organizations, can be exposed to compliance risks. Compliance risk is an organization’s potential exposure to legal penalties, financial forfeiture, and material loss, resulting from a failure to act in accordance with governing laws and regulations and internal policies.
Non-compliance risks include:
- Missed filing deadlines
- Lack of deal readiness
- Reputational loss
- Business discontinuity
Common causes of non-compliance risks include:
- Lack of effective data management
- No framework or system for tracking deadlines or filing documents
- Ineffective operations and processes
- Changing reporting regulations and due dates
Ultimately, non-compliance puts your organization at risk of losing its good standing and forfeiting revenue, among other potential outcomes.
5 Tips to Avoid Legal Entity Compliance Risks
On average, non-compliance costs are two times more expensive than annual compliance fees. For many organizations, simply implementing solid compliance policies and procedures can help effectively manage compliance risks. However, organizations that desire noncompliance prevention altogether should go a step further.
During the webinar, we highlighted 5 steps you can take to avoid legal entity compliance risks:
1) Determine your deadlines.
To avoid noncompliance, you must first understand which reporting requirements and deadlines apply to your company. Check with your Secretary of State for regulations and reporting due dates.
2) Document a formal compliance strategy.
Once you’ve identified your deadlines, you can document your compliance strategy. Your formal compliance strategy should outline all of the reports you’re required to file throughout the year, deadlines you must meet, and documentation required for each report.
Note: Your compliance strategy should grow with the organization. If your formal compliance strategy hasn’t been reviewed or updated in years, now is the time to revisit your strategy.
3) Compile and store documents in a central, secure location.
When it’s time to file, scattered documents can create inefficiencies that slow you down. In fact, office professionals spend 50% of their time searching for information. By compiling your documents and storing them in a centralized, cloud-based location, you will be able to easily locate and reference documents in the future.
4) Partner with a corporate services provider.
A full-service Corporate Services Provider, like EntityKeeper, can assist with your annual reports filing from start to finish. As a highly specialized compliance expert, the provider is uniquely positioned to help you create personalized best practices that keep you compliant with legal standards and in full control of your business.
5) Implement purpose-built technology.
Excel spreadsheets have several limitations. For one, spreadsheets are static (meaning changes to the file are not automatically updated across the organization). If someone accidentally updates an “October 3” deadline to “October 31” in the spreadsheet, your team risks missing a deadline. With purpose-built technology, like EntityKeeper, all of your documents and deadlines are centralized and updated in real-time, so you never miss a due date.
4 Steps for Simplifying Legal Entity Compliance
As the regulatory environment changes, organizations may no longer have the luxury of waiting to review their entities quarterly or only once every six months. Instead, as new regulations such as the Corporate Transparency Act take effect, organizations may find that they have less time to review and gather the required information.
During the webinar, we identified steps you can take to simplify legal entity compliance:
Step 1: Perform an internal audit of your entities.
Step 2: Review and update your current entity tracking process.
Step 3: Create and document your entity management process.
Step 4: Connect with a 3rd party provider for an entity “health check”.
As you consider these four steps, you should note that an entity management technology and corporate services provider, like EntityKeeper, can guide and assist you with completing each step on the list.
How Entity Management Software Can Help
EntityKeeper provides filing services including formation, incorporation, mergers, and annual reports. With a corporate service provider like EntityKeeper, you can avoid time-consuming manual tasks (and costly non-compliance fines).
Watch the on-demand webinar, Streamlining Entity Management and Compliance in 2023, to hear the full conversation.