In today’s regulated business environment, wise franchise owners know how to handle the relevant compliance considerations. One of the heaviest business expenses is a lawsuit, so let’s discover the best ways to avoid it preemptively.
Tips for Helping Your Business Maintain Compliance
Here are some helpful tips on ways you can keep your business clear of legal trouble and hassles.
- Always Do an Annual Report for Your Business.
- Business transparency is one of the best ways to avoid legal entanglements. Your annual report documentation can really help in this regard, and it’s mandatory in most jurisdictions. It gives your clients and government auditors the assurance that you are forthcoming about your business’s financial standing and other pertinent information
- Renew Business Permits, Licenses, and Hold Meetings with Relevant Stakeholders as Often as Necessary.
- Common franchise enterprises like food service and health care have many permits and licenses they must update regularly. It takes nothing for a restaurant to get shut down for failing to have staff members certified on food safety requirements. You don’t want to get it done late too often either.
- Meetings are another great way to ensure transparency. These are usually held annually, should be documented thoroughly (record the minutes), and include at least the business’s board of directors or corporate officers.
- Keep Your Taxes & Accounting as Spotless as Possible.
- You probably learned even before you considered franchising your business that it’s critical to have a good accountant. It’s even more significant when you expand into a franchise with several units, sprawled out across several diverse geographies.
- Your operations manual should spell out a process and you should specify the software (e.g QuickBooks) that your franchisees will need to ensure they manage payroll in a timely and consistent manner for employees of your franchisees. Whether you employ full-time staff or contract workers, you need to be sure your accounting systems send tax forms such as the 1099 form after workers have earned $600 or more. Many businesses become insolvent because of poor tax compliance and accounting.
- Become Educated on Business Entity Types.
- Speaking of taxes, learn about the different business entity types and how the IRS views them. Some are more advantageous than others, but it depends on what kind of business you’re running. There are three major types: sole proprietorships (perhaps what you have now but not fitting for a franchise business), partnerships, and Limited Liability Corporations LLCs. You can learn more about the legal significance of these and see how they’re further broken down with this excellent reference source on business entity types. This is also an important discussion to have with your attorney.
- Understand the Processes and Requirements for Interstate/International Expansion.
- Some states view franchising more favorably than others. Some require the filing of your FDD each year while others require it to be registered. Some states require neither but all states require that to sell a franchise, a candidate must be presented with a Financial Disclosure Document at least 14 days prior to signing a franchise agreement or exchanging money. This is part of the pre-sale due diligence process.
FranchiseYourBusiness.com wants you to be successful at your franchising endeavors, but you cannot do that without possessing a keen eye for compliance issues. Smart business owners are proactive in addressing regulatory requirements to prevent getting blindsided when trouble arises. As always, if you need assistance preparing your franchise for regulatory compliance, you are in the right place to find support.