The end of the year is busy time if you own a small business or invest in commercial real estate. In addition to holiday parties and time with family, you will likely be reviewing end of year performance, budgets, and planning for the new year.
It is also an excellent opportunity to pause and carefully review key corporate documents - something business owners regularly put on the back burner. It can be easy to get lax with these basic practices because record keeping may not have an immediate impact on profitability. However, setting up an LLC or corporation won't protect you if you failed to follow these fundamental rules, and you and your investments run the risk of slowly leaking profit if you do not carefully review this information on a regular basis.
This is especially important in 2024, as the Corporate Transparency Act (CTA) will go into effect on January 1. This sweeping regulation, which we explain here requires small business owners to carefully consider who they need to disclose to the United States Financial Crimes Enforcement Network (FinCEN) under the CTA and carries stiff penalties.
In light of the above, here are ten end of the year tips to prepare you for the CTA and to get you ready for 2024:
- Locate and review your companies current operating agreement or bylaws. Check to make sure all major decisions were adopted through written resolutions or amendments
- Review your end of year results, look at any variances from your proposed budget, and determine if you can explain them.
- Consider significant capital expenses you anticipate for the upcoming year and evaluate whether you have sufficient funds to address them
- Review your lease if you are a tenant, or the leases of your tenants if you are a landlord. Plan for when leases are up for renewal, look at the current market conditions, and, if you're a landlord, make sure you have a lease amendment form in place in case you need to negotiate terms other than just basic rent.
- Read through your major vendor contracts and determine whether they need to be re-negotiated, modified, supplemented, or cancelled.
- Confirm your standard documents are, in fact, standard. They should be implemented across your company using reusable templates. We have found creating these for our clients has saved them a lot of time and money.
- Review your loan documents for real estate or equipment, and confirm when the loans become due, or interest rates adjust.
- Re-read and update your procedure to reconcile your building's operating expense reconciliations. Again, go back to your lease - whether you are responsible for paying the Operating Expenses as a Tenant or charging them as a Landlord - to make sure the Operating Expenses you are being charged are correct, so when you get a true-up at the beginning of next year, you are ready.
- Check your professional licenses or permits, if required, and when they are up for renewal.
- Become familiar with your responsibilities under the Corporate Transparency act which goes into effect on January 1, 2024. This is a sweeping federal regulation that requires small business owners to disclose information about their companies in an effort to curb money laundering. It is sometimes very difficult to determine who should be included in the disclosure, and information about the requirements is constantly being updated. Stay in contact or and have your accountant and attorney help you with compliance.
As a business owner or real estate investor, is likely the last thing you think you have time to do at the end of the year. However, it can easily be delegated to your outside legal counsel and accounting team. Please contact us if you would like some additional assistance auditing your current documents and providing a strategy to get you prepared for the CTA and for 2024.
