Adam Sand and Chris Middleton explain why small business owners need corporate compliance: Secretary of State filings, operating agreements, meeting minutes, licenses, and tax filings. Skip these and you lose liability protection, face penalties, and risk losing your entity status entirely.
The government tax system is designed to confuse you and most CPAs just happy historians filling boxes. That's why business owners get blindsided every tax season. I'm Adam Sand, CEO of the Roofing Business Partner. Today, Chris Middleton, co founder of Make Taxes Fair, reveals how corporate compliance can protect your business and unlock powerful tax strategies.
The government has a system to take our money. This is a visual representation of the taxpayer roadmap. And their system is one of confusion. And that leaves busy business owners with the lack of time, energy and desire or in a state of overwhelm. And most people say, well, my CPA has me covered, says every busy business owner ever. But in reality, most CPAs are what I would call happy historians. They're putting the right numbers in the right boxes, but not doing much in the way of being proactive. And the results are, you feel like at tax time you step in the ring with Uncle Sam and you just get a total ko. And most people try Google, they Google answers, they go to friends and say, you know, hey, what are you doing on your taxes? Which can lead to some fun experiences. Or you, you've reached out to your CPA and said, hey, I need help with X, Y or Z because you googled it, talked to a friend and not gotten much in the way of response. What's lacking or what's missing is you need a system of efficiency. And that's what we've created to help people give education with evaluation tools to execute and lead you to a state of efficiency. And that system is what we call the clear edge framework. And today we're going to dive into legal structure. We're going to talk about the legal structure component because that's what corporate compliance is all about. But the legal structure and corporate compliance leads to deduction optimization, optimization of employees, accumulation of wealth. Those are things that are directly impacted by this. So corporate compliance, what is corporate compliance? What are the consequences of non compliance and what to do about it? And creating a system around this. So the corporate compliance is part of the legal structure or pillar from the clear edge framework. And basically why I'm talking about it, it's more of a legal requirement, but it's a blending, an amalgamation of legal and tax. Right. It's kind of combination of the two. So I always sell people, I'm not an attorney, I don't pretend to be one on Zoom tv, the phone, like that's not my jam. I do taxes. So this is not legal advice. We are not attorneys, educational information only. And our job is to just make you aware of? Hey, you should be doing these things. So legal requirements, when you create a corporation, whether it's an LLC or a corporation, an actual C corp, you create that at the Secretary of state level. That's part of your corporate compliance. You now have created a separate legal person, an entity in the eyes of the law. Your corporation is a separate legal person in the eyes of law. Now you have compliance documents, corporate compliance, that you need to file with the Secretary of State every year. Surprisingly, I'm in California and their corporate compliance document is like, takes 10 minutes to complete and cost a whopping 30 bucks a year. So it's not bad. Then there are internal documents. Well, those are your operating agreements. Those are your internal documents that say, hey, here's how we operate. If something happens to the owner, it'd be like a buy sell agreement, all those things. And then you have external things such as registrations with your state contractors, licensing board or governing agency, business licenses, so on and so forth. So there are legal requirements of things that you need to do. But why does all that matter, right? What happens if you don't do it? Well, if you don't do it, you put yourself at risk, like of losing whatever protection that you thought you had or thought you wanted by setting up a corporation. You're like, oh, I want a corporation. In most states, if I have a corporation but I go out and do something stupid and cause harm to somebody, a corporation will not protect me against my own negligence. But if I have employees and I hire them and they go out and do something stupid, well, that's where a corporation could provide a layer of protection for you. So the types of compliance again are internal meeting minutes, corporate resolutions, shareholder compensation study. Like if you're paying yourself a W2 wage as an S corp owner, and then the external, which are the secretary of state registered agent, your tax filings, that's part of your corporate compliance. To keep your corporation status current, you have to file the tax returns, licenses and permits. So again, why does all this matter? Well, if you don't fill out the documents, if you don't do the corporate compliance, I have clients where they come to me and the first thing I do and I onboard a client is I go check out their secretary of state and do a business search and see have they done their corporate compliance for their state. Because if they haven't, that'll tell us their legal structure could be suspended or terminated at the legal level with the Secretary of State. And now we have problems. We have to unwind and figure out and say, okay, what do we have to do? And penalties and fines. So I would say, you know, that old saying of an ounce of prevention is worth a pound of cure. It's just a function of are we going to take action now or deal with the cost of procrastination. So from the playbook that we're going to give you, there's several steps and there's a playbook and then there's a guide. I'm going to blend the two together. Eventually the two combined are going to give you, you know, here are the steps that you need to take after forming a corporation. So you should maintain a registered agent. That's somebody that's going to receive, if you are sued or legal documents, they're going to deliver those to that person instead of you maintain a notice of public. If you're doing any DBA or hey, I'm doing business as, you know, make taxes fair, right? That type of thing. So creating the corporate bylaws, all that, all that jazz, all the things that you need to do when you create a corporation and then if you're a new entity, there's initial steps that you need to do to say, okay, check those boxes and do those initial things. And then if you're existing, there are things that you need to do ongoing. So corporate compliance, it's more than just that regulatory hurdle. You gotta do it. It helps your business move forward. And again, it's easy. Skip guys and gals. It's. It's a royal pain in the petunia. If you get caught with your shorts down in an audit and you're like, I don't have it, that can have some pretty major repercussions.
