With 2023 drawing to a close, you’re probably looking forward to winding things down and put another year in the books. Before gearing up for all the big things ahead for your business in 2024, it’s important to conduct a review of some of the legal aspects of your business to make sure everything from your incorporation paperwork to employee handbook is up to date, compliant and serving its purpose. This will allow you to feel squared away for what’s to come.
In this article, we identify important issues for you to review and consider as you move toward the new year. If you have questions or need help with any of these items, we are here to help.
- Update and file annual statement with the State of Michigan. This reminder presumes that if you are operating a business in Michigan, then you have already organized the business as a limited liability company (“LLC”) or other legal entity. If you haven’t, you should, because otherwise you’re potentially putting your individual assets at risk for liabilities incurred by the business. If you are organized, then make sure to file your annual report on time. The deadline for filing an LLC annual statement in Michigan is February 15, 2024. However, before filing, make any necessary updates to the annual statement. Did your registered agent or office address change? If so, your annual statement should reflect those types of changes.
- Prepare to comply with the Corporate Transparency Act (“CTA”). The CTA is a new federal law that takes effect January 1, 2024. It’s a reporting requirement that allows the Financial Crime Enforcement Network, or FinCEN, to gather information about Reporting Companies, Beneficial Owners, and Company Applicant(s). Reporting Companies created or registered prior to January 1, 2024, must complete an initial report with FinCEN before January 1, 2025. Entities formed or registered in 2024 will have 90 calendar days from the date of formation or registration to file an initial report. Unlike many federal laws, which only apply to businesses with a certain number of employees or a certain amount of revenue, the Corporate Transparency Act applies to most small to midsize businesses—even one-person businesses. In fact, most of the exemptions to complying with its requirements apply to very big businesses. While the risks of noncompliance are severe, there’s no need to panic. We can guide you through the process.
- Conduct Shareholder meeting/Annual board meeting. The benefits of running an incorporated business in Michigan, such as limited liability, come with corresponding responsibilities. Business owners must adhere to certain “corporate formalities,” one of which may be having an annual meeting of shareholders and/or board members. It is during the annual meeting that new board members may be elected and other major corporate actions ratified and recorded into the official records of the business.
- Prepare for repeal of “Right to Work.” Earlier this year, the Michigan legislature became the first state in decades to repeal its right-to-work law. Michigan’s right-to-work law provided that employees in Michigan could not be forced by union contracts to join or financially support any labor organization as a condition of employment. The repeal of the law was expected to take effect on March 30, 2024. However, because the Michigan legislature ended its legislative session early this year, on November 14, 2023, that means the right-to-work repeal will likely be effective on February 13, 2024.
- Review contracts. It’s important to review the terms of conditions of contracts your business is a party to because some may include automatic renewals that you were not aware of and may not desire. End of year is also a good time to determine whether you want to renegotiate any terms in contracts with vendors or customers/clients.
- Prepare to pay more for minimum wage. Michigan’s Improved Workforce Opportunity Wage Act of 2018 establishes the schedules of increases for Michigan’s minimum wage. On January 1, 2024, the minimum wage will increase from $10.10 to $10.33 per hour. In addition, the 85% of the minimum hourly wage rate for minors ages 16 and 17 will increase to $8.78 per hour. The tipped employee rate for hourly pay will increase to $3.93 per hour.
- Get your tax records in order and make any required tax payments. Before the rush of the new year starts, make sure you have your tax receipts, financial statements and reports, and other records you may need from 2023 in order. In addition, make any required state or federal tax payments before year end so you don’t incur any unnecessary penalties or interest.
- Send out 1099s. If you used independent contractors in 2023, send them 1099-NEC (nonemployee compensation) forms by January 31, 2024. Forms must be filed for nonemployee compensation amounting to $600 or more during a tax year. The penalty for failing to file varies from $60 to $630 per form, depending on how long past the deadline the business issues the form.
- Make sure employment policies are up to date. If you have employees, take a fresh look at what your employment policies and procedures are and how you are communicating and enforcing them. There are always changes in federal and state employment laws and regulations, so it’s a good idea to conduct a review with an experienced employment lawyer, as well as update your business’ employee handbook—or create one in the first place.
Needless to say, there is a lot that goes into running a successful—and compliant—business in Michigan. Some of the “to-dos” listed above are simple, while others are complex. Don’t worry— we are here to help you through it. If you have any questions or require assistance, please contact Zana Tomich.