If you have established your business idea into a limited liability company then you have to ensure that it remains in good standing to avoid any shutdowns. As a company secretariat, it is your responsibility to keep the business standing through entity management, sometimes also referred to as subsidiary governance.
This phenomenon of the state stepping in is known as being struck off the register. If you find yourself in such a position, your company will not be able to trade with others, sell its assets, make any sort of payments or participate in business activities. In more serious circumstances, you might even face financial penalties, a directorship ban for 15 years or be personally liable for all company debts. The business name will be sold and other companies or entities might be able to use it. Lastly, any assets of the company that have not been liquefied will be transferred to the state. In order to get them back you will have to go through a process of restoration of the company. Which may not be ideal.
Given the harsh repercussions of being struck off the register, a good standing is something you will definitely want your business to have. There are a few ways through which you can ensure this:
- Timely Annual Reports
All corporations much file annual reports, pay fees and tax. Some states may require this report every few years while others remain true to the ‘annual’ part of the description and require it every year. These are just forms, available online as well, in which you will fill out business details. Fulfilling this small requirement can help you achieve good standing. Thus, mark your calendars and keep reminders.
- Up to Date Information
When you establish a business, you have to report a registered agent so that you have legal status. This individual, over the years may have been replaced or chosen to leave; in such a situation, if you fail to update your information, you will be more likely to be struck off. You might want to move to something more reliable like a registering agent company instead of an individual.
- Proper Records
Observing corporate formalities, the recording of financial and corporate records, will ensure that your liability for the business remains limited. Thus, you will not be held liable personally in case a business suffers debt or lawsuits.
This entails that a company should have independent up to date financial records so that a difference between the two entities, the company and the secretariat, is made apparent. This was the business is judged on its own rather than including the assets of the directorate as well.
These are three basic steps that you can take in order to ensure that your company demonstrates stability. In the longer term, you may even be issued the certificate of good standing which will help increase trade levels, profitability and will boost overall corporate stability.