For various reasons, you may have chosen to incorporate your business (for a survey of available business forms, please have a look at this previous article). Your work does not, however, stop at incorporation. You must keep your business in good standing.
Keeping your business in good standing is exactly what it sounds like – that is, ensuring that your business meets all legal reporting requirements to the government. Corporations in Michigan must file annual statements with the Department of Licensing and Regulatory Affairs by February 15th every year. Companies formed after September 30th of the preceding year are exempt from this rule. The annual statement should include any changes in the company’s resident agent or registered office information.
The state government sends a pre-printed form to the registered address of each company before the filing due date, except where a company elects to receive the notice electronically. For many businesses, this might be the best option as electronic notices can reach you anywhere. If, however, you opt to continue to receive the paper form, it is important that you update government records of your registered office address if your business moves. If not, the form might be sent to your business’s previous location and you may never receive it. There are minimal but necessary filing fees that must be paid (less than $30 as of July 2020).
That your business is in good standing demonstrates seriousness and responsibility to third-parties who might be looking to financially engage with it. This is especially true for lenders and financiers. Furthermore, submitting a yearly statement pushes you to organize your business in a coherent and competent way, and also requires you to keep good records.
Failure to keep your business in good standing may result in disastrous consequences. If annual reports are not filed for two years, a company loses its good standing status and seizes to have legal rights over its name. Thus, the company name becomes available for use by another legal entity.
Even more, in these COVID-19 affected times that are precarious for businesses, aid from the government such as the payroll protection plan may not be available for companies that are not in good standing. The TGQ law firm has recently handled such matters and would prefer that our clients avoid the stress and anxiety that ineligibility for needed government aid induces.
The benefits of keeping your business in good standing are immense and the consequences of failure are undesirable. The choice is clear, but when further guidance and advice is needed, the TGQ law firm stands ready to help.