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1. BUSINESS
COMPLIANCE
BASICS
AN OVERVIEW OF FEDERAL
AND STATE CONSIDERATIONS
PRESENTED BY:
LORI ANN FOX, ESQ.

2. There is only one definition for compliance.
A. True
B. False
POLLING QUESTION NO. 1
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3. DEFINING COMPLIANCE
Definition
Compliance means conforming with stated requirements. At an organizational
level, it is achieved through management processes which identify the
applicable requirements (defined for example in laws, regulations, contracts,
strategies and policies), assess the state of compliance, assess the risks and
potential costs of non-compliance against the projected expenses to achieve
compliance, and hence prioritize, fund and initiate any corrective actions
deemed necessary. (Wikipedia)
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4. TODAY’S TOPICS
Compliance
• State
• Federal
• Regulated Industries
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5. STATE COMPLIANCE
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6. STATE CORPORATION/LLC ACTS
• Considered “enabling” acts
• Compliance requirements
• Main areas of focus
– Annual report
– Franchise taxes
– Registered agent
– Transactional filings
– Foreign qualification
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7. WHY IS COMPLIANCE IMPORTANT?
• Penalties and late fees
• Lose good standing
• Continued non-compliance can result in
– Administrative dissolution
– Administrative revocation of authority in foreign states
– Loss of exclusive rights to name
– Loss of access to state courts
– Personal liability for individuals doing business on corporation’s/LLC’s
behalf
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8. ANNUAL REPORT
• Corps and LLCs required to file an information report
– Domestic
– Foreign
• Annual or biennial
• Varying titles/names of filing
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9. ANNUAL REPORT BASICS
Main function is to provide state residents, investors, gov’t
agencies with info necessary to locate and communicate with
domestic and foreign corps and LLCs
• Statutes prescribe minimum required content
• Possible administrative discretion for content
• Could be related to franchise tax
• Due date may be fixed or based on anniversary
• Delivery - paper or electronic
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10. POLLING QUESTION NO. 2
A franchise tax is a tax on an entity’s:
A. Income
B. Assets
C. Locations
D. A and B only
E. All of the above
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11. FRANCHISE TAX
• Privilege tax for entity’s right to do business
– For corporation, tax is generally based on authorized shares or net
income
– For LLC, may be fixed amount, number of members, net capital
accounts or other
• Not an income tax
• Usually found in business entity statute, not tax code
• Alternate names
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12. REGISTERED AGENT REQUIREMENT
• Purpose – streamline service on entities
• Two mandatory requirements
– Maintain agent, located in state, authorized to receive process on
entity’s behalf
– Notify filing office of any change in agent or address
• Consent may be required in some states
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13. TRANSACTIONAL FILINGS
• Transactions require public records to be updated
– e.g., formations, qualifications, changes of name or capitalization,
mergers, dissolutions
– File in domestic and foreign states
• Statutes and administrative regulations/policies can be a challenge
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14. DOMESTIC ENTITY COMPLIANCE ISSUES
• Amendments
– Required upon change
– Timing
• Corrections
– Use for errors
– Consent not required
– Effective on date of formation filing
• Restatement
– Option if many amendments filed
– Benefit
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15. POLLING QUESTION NO. 3
A foreign entity is:
A. An entity organized in a country other than the U.S.
B. An entity organized in a U.S. state other than the state of formation
C. Both A and B
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16. QUALIFICATION REQUIREMENT
• Must qualify before doing business in the state
• Few laws define “doing business”
• Most list activities that are not doing business
• Very fact specific inquiry
• How to comply
– File document with foreign state’s filing office
– Supporting documents required
– Pay fee
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17. POST-QUALIFICATION FILING REQUIREMENTS
• Qualified entity required to update public record
– Change of name in home jurisdiction
– Notify state if involved in merger, conversion or dissolution
• Check statutes for requirements
– Annual report
– Franchise tax
– Registered agent and office
– Amended certificate
– Withdrawal
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18. OTHER STATE & LOCAL COMPLIANCE ISSUES
• Business Licenses
• Taxes
• Property
• Disclosure Filings
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19. FEDERAL
COMPLIANCE
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20. FEDERAL COMPLIANCE
Major Federal Compliance Areas
• Anti-Trust
• Securities
• Anti-Money Laundering
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21. ANTI-TRUST
• Hart-Scott-Rodino Act
– Federal law requiring pre-merger notification filing
– 1976 law – refers to corporations & partnerships only as LLCs did not
exist
• Treatment of LLCs over time
• Thresholds
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22. SECURITIES
• Federal law definition
– Corporation
– LLC
• Securities cannot be sold to the public unless seller discloses material
information
• 1933 and 1934 acts require filings
– Form S-1
– Form 10
– Form 10-K
– Form 10-Q
– Form 8-K
– Forms 3, 4, and 5
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23. ANTI-MONEY LAUNDERING
• How might anti-money laundering affect a company?
—OFAC
—SDN List
• Relevant legislation
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24. REGULATED
INDUSTRIES

25. POLLING QUESTION NO. 4
Is your company is in a regulated industry (ex. - insurance,
tobacco, airlines)?
A. Yes
B. No
C. Uncertain
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26. STATE AGENCY ISSUES
• Insurance
• Mortgage Brokers/Supervised Lenders
• Alcohol Beverages
• Collection Agencies
• Charitable Solicitations
• Transportation
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27. FEDERAL AGENCY ISSUES
• ERISA
• FCC
• Interstate Commerce Act
• FAA
• USPTO
• DMCA
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28. RECAP & QUESTIONS
• Compliance definition
• State
• Federal
• Regulated Industries
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29. THANK YOU FOR
ATTENDING!
BUSINESS
COMPLIANCE
BASICS
AN OVERVIEW OF FEDERAL
AND STATE CONSIDERATIONS
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