10 Business Resolutions to Follow in the New Year
In addition to making the common New Year’s resolutions of eating less fast food and exercising more, consider these 10 BUSINESS RESOLUTIONS to follow which will help ensure that your business is successful in the coming year.
1) Update Your Business Plan
- Whether your business is well established or new, you need to establish yearly goals and monitor them. Does your business need a Sales Manager, due to recent growth? Is it time to bring in-house your outside Accountant or Bookkeeper? It is important to re-evaluate where your business is every year and to make new yearly goals to ensure that the business is on track in achieving its long term goals.
2) Monitor Business Expenses Monthly
- Business owners are generally accustomed to closely monitoring sales or billings. However, we have found, from our personal experience and from that of our clients, how important it is to also monitor business costs closely every month. For instance, if your business uses various service providers, it should be careful to monitor its invoices to ensure that the bills clearly reflect the actual time involved and that there is no duplicate billing. Also, a provider may be billing at above market costs. You need to know what the going rates are and consider renegotiating your service provider’s rates if they are high, or moving to a new provider, if necessary.
3) Keep Current on Taxes
- As a part of maintaining adequate books and records for your business, you must also monitor your business’ tax obligations (state, federal and local) to ensure that they are timely paid. Many Officers, Partners and Members are often unaware what taxes are due or when filings should be made. Quarterly returns and taxes must be paid to the state and IRS as well as employment related taxes. The consequences of not paying taxes when they are due may include being assessed substantive fines.
- Furthermore, the IRS will hold a business owner personally liable for failing to pay federal employment withholding taxes on time. For instance, if you are an Officer, Partner, or Member and are responsible for your business’ payment of taxes (or can direct payment), the IRS will hold you personally responsible for failure to pay the required employment taxes. Withholding taxes are treated differently than other taxes by the IRS because the employer has deducted withholding taxes from an employee’s paycheck, which taxes then need to be paid to the IRS. Only by educating yourself and monitoring tax payments can a business owner insure that recurring tax returns are filed and taxes paid.
4) Know What You Can and Can’t Do as an Employer
- As we reiterated in our Illinois Wage Payment and Collection Act Basics Article, businesses must be very careful to comply with state and federal laws. Failure to meet statutory requirements could result in a claim being filed against a business by an employee with the Illinois Department of Labor and a resulting hearing being conducted as a part of the Department’s investigation. Similarly, the federal Department of Labor may conduct an investigation for overtime and/or minimum wage violations by the business.
- Some common issues that we saw recently with our clients were (1) inadequate payment of overtime to hourly employees, (2) not correctly monitoring employee time sheets to prove compliance with statutory requirements, (3) unlawfully deducting money from employee paychecks and (4) misclassifying workers as an “independent contractor” when they should have been characterized as an “employee.” We would also note that bad employment payroll records can make these problems more difficult to defend. This year, your business should make it a priority to review wages and hours for hourly employees and to avoid deductions from employees’ wages.
5) Renew Necessary Licenses and Permits
- Your businesses may have to meet state and local licensing requirements to remain operational. If your business has a “business license” required by the City of Chicago, or another municipality, check to see when it needs to be renewed. If you do not timely renew your business license, the business may be fined or shutdown. Similarly, if your business is a professional business regulated by the Illinois Department of Financial and Professional Regulation (such as physicians and architects), the business must also have its state license periodically renewed as well. Make sure you diary renewal dates to insure compliance with these requirements.
6) Comply with Corporate Formalities
- One of the benefits of a corporation is that it is used to protect the personal assets of business owners from the business’ debts. In order to meet this goal, the owner of a corporation must comply with certain corporate formalities. First, an owner should not mix personal income with business income. As such, each business should have a separate business bank account. The business account should only contain funds and expenses related to the business.
- Second, if your business is a corporation or limited liability company, make sure that it timely files its Annual Report with the Secretary of State. Failure to file an Annual Report will result in the dissolution of the business. Reinstatement of a corporation or a limited liability company is possible, but expensive. In sum, complying with these formalities (maintaining a separate business bank account and timely filing Annual Reports) will help to ensure that you are personally protected from liability if your business is sued.
7) Do Not Bind Yourself Personally for Business Expenses
- As we mentioned in our Business 101 Article, a business owner may be personally liable for a business expense obligation if the owner inadvertently signs a business agreement (or contract) individually, and not in his or her business capacity. To avoid this mistake, make sure you always sign a business agreement in your business capacity (i.e., Member, Manager, President, etc.). For example, if you are the President of “X Corporation,” you should sign an agreement as “Jane Doe, President of X Corporation,” and not merely “Jane Doe.” Likewise, this rule dictates that a Member or Manager of a limited liability company also signs, using their title, as “Member” or “Manager” of “X LLC.”
8) Keep Track of Your Business Agreements
- It is best if all business agreements are evidenced by a written agreement. If a written agreement has been signed, make sure that a copy is maintained for your file. We recommend keeping a separate file for each agreement. In the event that only an oral agreement can be reached, you should confirm the terms of the agreement in writing (such as in an email or letter) or set out a summary of its terms in a Memorandum for your file. These practices are essential so that the business can monitor its obligations and that of the other party under the agreement. It can be very difficult to later prove an oral agreement exists in the event of a contract dispute, if no writing exists to confirm the terms.
9) Protect Your Business’ Competitive Advantage
- Like the secret recipe for Coca Cola, your business may likewise have a secret to success that it does not wish to share with the general public. This includes your business’ trade secrets such as its marketing strategies, customer and supplier lists, financial data, or various techniques, which give the business a competitive edge in the marketplace. Your business’ trade secrets should be properly identified and reasonable efforts must be used by the business to maintain the secrecy of this confidential information. On a practical basis, this means that the business should use Non-Disclosure Agreements with employees, service partners and, if needed, clients to protect its trade secrets. Moreover, the business should implement passwords on business owned computers and mobile devices. It should also mark business documents as “Confidential” and limit employee access to confidential information to minimize the risk of the disclosure of trade secret information to third parties.
10) Obtain Insurance for Your Business
- Each business should have insurance to cover risks that arise from fire, tornado, flood, and other natural disasters. In addition, your business should also maintain a liability insurance policy in case it is sued for injury to a person or property during the operation of the business. Insurance needs should be reviewed annually because a business’ needs may change as it expands or moves into new business sectors.
- We hope these Resolutions will help make your business successful this year. We take pride in not only resolving current problems for our clients, but also in being great business partners with our clients by helping them to avoid problems or to implement new opportunities. Please let us know how your business is doing and how we can better serve you in the coming year.
THE INFORMATION CONTAINED ABOVE DOES NOT CONSTITUTE LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT ANY ISSUES CONTAINED IN THIS BLOG PLEASE EMAIL US OR CONTACT US AT (708) 848-0800.