With summer coming to a close, business owners are officially in quarter four. It is crucial to address several key items before the year-end.
1. Legal Compliance
2024 has brought several new laws and regulations that have impacted businesses. There are two that business owners should keep top of mind given their December 31st/January 1st compliance deadlines.
First, the Corporate Transparency Act (“CTA”) went into effect January 1, 2024. The CTA requires businesses to disclose their beneficial owners to FinCEN through an online filing. Failing to timely do so may result in civil and criminal penalties.
For entities already in existence on January 1, 2024, the deadline to file the initial beneficial owner report is December 31, 2024. While there is active litigation challenging the legality of the CTA, there is no current nationwide injunction sidelining the CTA, meaning if you have not filed your initial report, it must be done no later than the end of this calendar year. More information on the CTA and filing requirements can be found here.
The second legal update effecting many businesses is the Final Rule announced by the US Department of Labor and Industry, which increases the salary threshold for certain employees exempt from the Fair Labor Standards Act a/k/a overtime exemption.
The Final Rule staggered salary threshold increases. The first went into effect on July 1, 2024, and the second on January 1, 2025. Business owners should review the exempt/non-exempt status of their employees to determine if the changes to the salary threshold will require: (i) a change in pay structure, i.e., converting a previously exempt employee to non-exempt, or (ii) pay raises for certain employees to remain exempt. More information on the Final Rule and the new threshold amounts can be found here.
2. Review Corporate Governance Documents
With year-end owner and management meetings, now is a great and natural time to review your business’s corporate governance documents, e.g., bylaws, shareholders agreement, operating agreement, etc. A thorough review of these documents can not only help confirm the procedure for providing notice to the owners of the annual meeting or understanding the vote needed to approve next fiscal year’s budget, but it can also identify areas that might need updating based on circumstances that have presented themselves in the last year.
3. Plan for Taxes
Whether 2024 was good, bad, or somewhere in between for your business, there will be tax strategy to consider. You should consult with your tax professional during the fourth quarter to understand the tax implications of the business’s year-end financials. They can advise on any tax-saving strategies to implement and assist in ensuring the business has all the necessary documents in order for tax filing deadlines.
4. Review 2024 Goals; Set 2025 Goals
Setting annual goals is key to the success and growth of a business. Owners and management should utilize the beginning of Q4 to identify which 2024 goals are on track, which are in sight, and those which may need to be readdressed in 2025. Further, as ownership and management begin to plan for 2025, new goals should be set. When formulating annual goals, consider how they play into the one-year, five-year, and ten-year plan for the business.
