Starting an LLC and registering it with the state is not sufficient to keep your business safe and active. LLCs have specific annual compliance requirements that help them maintain their legal status. First, you need to file an annual report, which updates your business information. You also have to pay any state fees or franchise taxes even if your business did not make any money that year. It also includes special permits or licenses for your business, to keep an operating agreement up to date, and to ensure your registered agent’s information is correct. Doing these things every year helps your LLC stay legal and focuses on growing your business.
An LLC helps your business look official and protects your personal assets, but to keep these benefits, you must follow your state’s rules every year. Most states require you to file an annual or biennial report with updated business information, such as members and addresses. Keeping your information ready is essential, or else you will face fines or even be closed.
1. Missing Annual Report Deadlines: Every state requires LLCs to file annual or biennial reports to keep their information up to date. If you forget to file, you could face late fees or your LLC might be closed by the state. Always track your deadlines using reminders or registered agent service.
2. Not Paying State Franchise Tax or Fees: States like California, Delaware, and Texas charge early franchise taxes even if your LLC is not making money. If you skip these payments, you could get penalties or your business could be suspended. Always check with a US accountant to stay compliant.
3. Not Having a Registered Agent: If you use a friend or family member and they miss important mail, you could miss lawsuits or official notices. This can lead to fines or loss of good standing. It is safer to use a professional registered agent service.
4. Mixing Personal and Business Money: Using your personal bank account for business transactions can remove your liability protection. Always open a separate US business bank account and keep clear records.
5. Skipping IRS Forms for Foreign Owned LLCs: If your LLC is foreign-owned, you must file IRS form 5472 along with a pro forma Form 1120 each year, even if you have no income. It is best to work with CPA who understands international rules.
6. Delaying EIN or ITIN Application: You need your Employer Identification Number to open a bank account or file taxes. Sometimes, you also need an Individual Taxpayer Identification Number. Delays can prevent you from opening a U.S. bank account or filing taxes on time. Apply for these numbers as soon as possible.
7. Ignoring Local Business License: Registering your LLC with the state is not enough. Many cities and countries need separate business licenses or permits. Always check local rules. Cities like New York, Los Angeles, and Chicago have separate business license requirements.
8. Not Updating Company Records: You must keep your LLC’s documents, like operating agreements and ownership records, up to date. Poor records can cause problems during audits, legal disputes, or when raising money.
9. Thinking LLCs Don’t Pay Taxes: LLCs are not tax-exempt. Even if you have no income, you may still need to file tax returns. Not understanding your LLC’s tax rules can lead to under-reporting or penalties.
10. Forgetting to Register in Other States: If your LLC does business in more than one state, you need to register in each state. Skipping this can lead to fines and make it hard to enforce contracts. Check where your LLC needs to be registered and get legal advice if needed.
To keep your LLC safe, you must follow these steps, like filing reports, paying taxes, and keeping records updated. Many Indian entrepreneurs miss these steps by mistake. These small errors can lead to big problems like fines or even business closure. So stay organised or take help from professional experts who help to protect your business.
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US Bank Account Compliance for Indian-Owned LLCs
If you miss the deadline to file your annual report or pay franchise taxes, your LLC may:
Yes. For foreign-owned single-member LLCs, the IRS mandates filing:
No. Mixing personal and business funds is a common compliance mistake.
Doing so risks:
If you use a friend or relative who misses an official notice, your LLC could:
Yes, if you do business in another state, you must register as a foreign LLC there.
This includes:
No. You can form and manage a U.S. LLC 100% remotely.
You’ll need:
Costs vary by state. For Indian founders, common expenses include:
Top states for foreign-owned LLCs are:
These states are often chosen to minimize costs and paperwork.
Yes. State registration does not exempt you from local or county business license requirements.
Examples:
Avoid common errors by:
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