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The AR Group

12 Days of Business: Assess State Registrations

Day 8:

The end of the calendar year is the perfect time to perform an assessment of a company?s corporate structure to ensure that the various entities are in good standing in all states in which the organization is doing business, and not inadvertently and unnecessarily registered in states where there is no longer any activity.

As organizations grow and expand into new marketplaces, they file the necessary documentation to ensure they are qualified to do business in those states. If business decisions dictate that the company no longer wishes to pursue business in that area, it will need to actively withdraw therefrom. Failure to do so will result in unnecessary state fees, costs for agency representation, taxes, internal time to perform filings, as well as potential liability for any claims in that state.

We recently performed an audit of a client?s corporate structure, and determined that three of its subsidiaries were registered to do business in twelve states, despite only actively doing business in two. After determining that there were no potential claims in any of those states, we counseled our client to withdraw the inactive entities. The total ongoing cost savings to the organization following the withdrawal of state registrations was approximately $5000 per annum.

By making an annual organizational assessment part of the calendar year wind-down, companies can capture ongoing savings and dedicate internal time to relevant business endeavors.