5 Questions to Keep Small Businesses From Being Sued

Now, while we are in the first quarter of the year, it is a very good time for small business owners to ask the set of five questions below. An annual review of the questions can avoid lawsuits. It’s even better to review these questions at the beginning of each year.

The five questions every small business owner should ask are:

1. Have all active business contracts been audited for expiration dates?

It’s important to have a system in place to audit the contracts that will be expiring in advance of the expiration date.

Why in advance?

So, business owners can contact their small business attorney to strategize and negotiate, if necessary, the renewal of these contracts. There may be notice and other requirements prior to the expiration of the contract that may need to be met. As a small business attorney, I always appreciate it when small business clients notify me in advance of the expiration date. One month is usually what I consider to be good notice from the client.

2. Has the annual report been filed with the Secretary of State’s office?

Filing the annual report each year as required by the Secretary of State’s office along with the required annual filing fee is a requirement. In MA the annual report is filed on or before the anniversary date of the initial filing fee for a LLC. Other types of small business entities have different dates. A failure to file will result in a late fee and in MA depending on the type of business entity failing to file a set number of times will result in an administrative dissolution of the business.

3. Has the business started to do business in other states?

Normally, businesses do not need to register in another state also called foreign registration unless the business is doing business in that other state. To determine if your business is doing business in another state and needs to foreign register click on this link.

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4. Have there been any major changes made in the business in terms of the following: any changes to the board of directors (additions or deletions), change in the business address, resident agent, change in manager (for LLC)?

All changes must be reflected in an amendment to the business filings at the Secretary of State’s office. All changes to the board of directors should be reflected in a resolution as well as in an amendment at the Secretary of State’s office.

5. Have you reviewed business changes with your business accountant?

It’s important to notify your accountant of any changes in the business and in turn be informed of any tax changes that could affect your business planning and strategy for the next three quarters.