You may be wondering why so many business owners choose January 1 as the start date for their company. Surely, it’s not because everyone has the same New Year’s resolution, right?
The fact is, there are a number of distinct advantages to launching your Limited Liability Company (LLC) at the beginning of the new year, rather than during the middle or end of the year. And the good news is that in Georgia, you don’t have to wait until the new year to actually file your paperwork to create your entity.
In fact, one of the best times of the year to start the process of creating your new company is at the end of the previous year, which happens to be right now. This is made possible by what’s known as delayed effective filing. This week, I’ll explain how such a filing works, and outline some of the key benefits of setting your entity’s launch date for the start of the new year.
How Delayed Effective Filing Works
Here’s how it works: To register your new company with the state of Georgia, you must file articles of organization to set up the LLC. When you file this document, you’ll typically be given the choice of whether the state should approve your entity when they receive the document or at a future date specified by you.
To have your LLC start in the new year, you simply designate your company’s effective start date as of January 1, 2022 (or any other date) within your articles of organization. When the state receives the filing, it will be processed in the order it was received. This secures the exact date you want your company to officially start and minimizes the chance of a bureaucratic delay that you would encounter if you wait until the new year to file.
While filing these documents is relatively simple, mistakes or omissions can result in a delay of the documents getting processed and even additional fees.
Streamline Tax Filing and Bookkeeping
Forming an LLC with a January start date offers you a clean state when it comes to bookkeeping and taxes. Your company can start earning revenue and tracking expenses in the new year, without the hassle of keeping your books for just a few weeks or months at the end of the year.
Plus, your first tax returns generally aren’t due until the year following your entity’s formation. By choosing a start date in January, you have more than a year to prepare and file your company’s taxes. On the other hand, if you form your entity in December, your company’s tax return is due within just a few months
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Simplify Administrative Compliance
Once formed, LLCs have to adhere to a number of administrative formalities in order to remain in compliance with state law and maintain the personal liability protection offered by the entity structure. If you fail to adhere to such formalities, a court could remove the protective barrier shielding your personal assets, known as “piercing the veil,” leaving you personally liable to creditors in the event of a judgment.
Although Georgia is a state in which the corporate formalities required of LLCs are comparatively light and straightforward, there are nonetheless formal requirements for companies, including the filing of an annual registration and paying of filing fees.
As with filing your tax returns, by choosing a January start date, you can avoid having to file your annual report within a few months of opening your doors. Along those same lines, if you file your LLC formation paperwork in late 2021, but request an effective date in January 2022, you will only have to pay a filing fee for 2021, rather than for both years.
Beat the Rush
Filing early can also help you get your company’s paperwork processed more quickly. January is usually the busiest time of the year for processing business applications at many Secretary of State offices, so if you want your LLC’s official launch to be in January, it makes sense to file at the end of the prior year with a delayed effective date.
If you wait until January to file, it might take longer for the Secretary of State to process the paperwork—sometimes between 30 to 60 days—and you may not get the effective start date you want.
Don’t Do It Alone
At Horizon Law Firm, we serve as business counsel to numerous small businesses in the state of Georgia. In addition to setting up and maintaining your LLC, we also are able to serve in an ongoing role as your outside General Counsel. In doing so, we can help you build and maintain a solid legal, insurance, financial, and tax foundation for your business, to ensure your company is positioned properly for rapid, sustainable growth. We can support you in handling these tedious yet highly important parts of running your operation, so you can devote all of your energy and passion to growing your business into something truly meaningful for yourself, your clients, and your family. Give us a call to discuss how we can serve as your trusted advisor that sets up a proper foundation for your business.