If you have started a side hustle that is experiencing growth and success, chances are you may be thinking about the future of your side gig. You may start planning to turn the side hustle into your full-time line of work and focus your attention on business expansion efforts.
As a side hustle grows, however, it’s important to ensure the side gig stays in compliance.
- Updating operating agreements/corporate bylaws
- Filing an annual report
- Filing articles of amendment
- Paying necessary fees
- Renewing business licenses and/or permits
Compliance essentially means following the rules. In the case of a side hustle, once an entrepreneur decides to incorporate or form an LLC, they will need to meet internal and external business compliance requirements. These requirements are determined by the startup’s state of incorporation.
Here’s a look at a few compliance requirements that newly incorporated startups need to focus on to stay in good standing.
1. Update Operating Agreement and/or Corporate Bylaws
Incorporated businesses must meet a set of internal compliance requirements. Side hustles that incorporate as an LLC will draft an operating agreement. This is a document that shares the rules and regulations for running an LLC. Meanwhile, side hustles that incorporate as a corporation must draft bylaws that outline the rules and regulations for operating the corporation. If there are any key details that change about the LLC or corporation’s internal management structure, updates must be made to its respective operating agreement and corporate bylaws.
What about corporate minutes? Good question. In addition to drafting bylaws, corporations must take detailed minutes, or notes, during meetings. These minutes act as a record of the meeting. You do not need to update minutes after they have been approved, as determined by the corporation’s bylaws. However, minutes must be taken during each meeting and made available to members of the corporation for review.
2. File an Annual Report
Incorporated businesses must also be able to meet external requirements, which are compliance at the state and federal level. An annual report is one of several external compliance requirements for side hustles turned small businesses.
Registered LLCs must file a statement of information known as an annual report with their state of incorporation. This document acts as a record to note any changes in an LLC. Some of these changes may include appointing new members, change in registered agent, or changes in business activity.
Make note of these changes within your LLC in its annual report. Your incorporated business will likely receive notice of the state of when its annual report is due. Make sure to file the report on time to ensure your incorporated business remains in good standing.
3. Filing Articles of Amendment
What if your incorporated business has experienced significant changes, such as change of its business name or changes in business ownership?
Changes in this type of information require filing articles of amendment to stay in compliance with your state of incorporation.
4. Paying Necessary Fees
There are a range of external fees you will need to pay to stay in compliance and keep your side hustle turned small business in good standing.
For example, you may need to pay a small statement fee with your annual report filing or pay franchise tax fees. Check in with your local Secretary of State to learn more about these fees and determine the amount you will need to pay based off the documents you are filing. As always, remember to pay these fees on time. Your business may be charged with late fees or even penalized by the state for late payments.
5. Renewing Business Licenses and/or Permits
Many businesses require business licenses and permits to operate in their respective industry, city, and county. After initialing obtaining a business license and/or permit for your company, remember to renew it as per state requirements. Determine the deadline for renewal and inquire if you will need to pay any added fees for renewal. If you have any seller or sales tax licenses, make sure to get these renewed as well.
This is just a shortlist of items that growing side hustles turned small businesses need to focus on to remain in compliance. Take care of internal and external compliance requirements and you’ll be able to ensure your business stays in good standing.