Year-End Checklist for an LLC

By Roberta Codemo

Year-End Checklist for an LLC

By Roberta Codemo

The end of the year is an ideal time to complete necessary tasks that will keep your limited liability company (LLC) in good standing with the state where it's registered. Follow this year-end checklist to make sure you close out the year properly.

Meeting Requirements

Unlike a corporation, there is no statutory requirement for an LLC to hold annual meetings. This isn't to say that an LLC shouldn't hold meetings. In fact, it may be required as part of the LLC's operating agreement, which is an agreement among members on how the business's day-to-day operations are to be run. Maintaining meeting minutes helps keep everyone on the same page and is an opportunity to review the past year and discuss plans for the year ahead. Minutes are also evidence that the LLC is operating in accordance with its organizational documents, providing a written record of actions taken by the LLC, which can help should disputes arise.

An LLC won't lose its liability protection if it doesn't hold meetings, unless it's required to do so by the organizational documents. In most states, however, failure to hold meetings doesn't constitute “piercing the corporate veil" or holding members personally liable for the LLC's actions. Even then, there is a workaround to meet this requirement: the members can draft a written document called a "unanimous written consent in lieu of meeting," which must be signed by all members and becomes a substitute for holding meetings. So be sure to follow your LLC's particular requirements for filing and recording minutes each and every year.

Reporting Requirements

Most states require an LLC to file an annual report—also called a Statement of Information—though not every state does. For example, Delaware, Ohio, and South Carolina do not require annual reports. Check with your state's filing office regarding its requirements.

An annual report simply lets the state where the LLC does business know how the LLC is doing and if it is still in operation. The report may include additional documentation if the LLC has undergone substantive changes during the past year. For the annual report, you need to provide basic information such as the LLC's name and federal identification number, its principal place of business, its business purpose, owners' names and addresses, authorized signatures for legal documents, and the name of the registered agent.

Each state has its own set of rules that an LLC must follow when filing its annual report. For example, some states require an LLC to file its report annually while others, such as California, Iowa, and Indiana, require an LLC to file every other year after the initial filing. Pennsylvania requires newly formed LLCs to file every 10 years.

States also have their own filing deadlines. Some states have a uniform filing date, while others require LLCs to file on or before their anniversary date of formation. In addition, the LLC may also have to pay a filing fee, which also varies between states. Failing to file an annual report can have serious consequences, including fees, penalties, or involuntary dissolution, resulting in loss of liability protections.

Federal and State Income Tax Requirements

Under federal tax laws, an LLC is not treated as a business entity and does not pay federal income taxes. Rather, all profits and losses “pass through" to the members, who report the profits and losses on their personal federal income tax returns, just like in a partnership. An LLC is classified as a sole proprietorship or a partnership based on the number of members, unless the LLC elects to be classified and taxed as a corporation.

A multimember LLC must give each partner a Schedule K-1, which shows each member's share of the LLC's profits, losses, and deductions, to include with their personal federal income tax return. Some states apply an annual tax to LLCs, so check with your state's regulatory agency. Each member must also pay quarterly estimated taxes and self-employment taxes to the Internal Revenue Service (IRS) and the state tax office.

Some states require members to pay state income taxes, so check with your state's tax authority. An LLC may also have to pay an LLC tax on income in some states, while other states charge an annual LLC fee—also called a franchise tax, registration fee, or renewal fee.

Tax-Record Requirements

An LLC must maintain records of its income and expenses on the basis of a tax year, or annual accounting period. The IRS recognizes two types of tax years: a calendar tax year and a fiscal tax year. A calendar tax year runs from January 1 through December 31, while a fiscal tax year runs for 12 consecutive months and ends on the last day of any month except December. A fiscal tax year may also be a 52- to 53-week year that ends on the same day of the week when it last occurs in that month or nearest to the last day of that month.

Additional Requirements

There may be additional requirements that an LLC must take care of, such as renewing state or local licenses and permits. Your LLC may also be required to pay state and local taxes, such as property taxes and sales tax. If you're not sure, always check with the state, county, or local governmental authority.

There are a lot of reporting requirements that an LLC needs to meet at the end of the year, so it's important not to put things off to the last minute. Failure to comply can have serious consequences.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.