When was the last time your entities had a “check up”? If your answer is “never” or “it’s been a while”, your firm could probably benefit from an entity assessment. As you consider whether you want to conduct a health check yourself, or have a provider manage it for you, you may have questions. Read ahead for answers to some of the top questions you and your team may have.
What is an entity health check?
An entity health check is the process of verifying an entity’s status with the Secretary of State. It’s important to note this must be done for the entity’s state of formation and any states of operation. Since the Secretary of State is specific to each jurisdiction, the process of verification and possible entity statuses can vary, but the end goal should always be to verify that your entities are in good standing.
An entity health check will help you:
- Identify the Secretary of State for each jurisdiction and verify all your entity statuses
- Understand which entities aren’t in good standing, what the underlying cause is, and next steps to take
- Mitigate potential consequences, such as fines/penalties, loss of name rights, and dissolution or revocation
Who is responsible for performing an entity health check?
The responsibility of conducting an entity health check depends on your company’s preference. For most teams, the two options will be to:
- Conduct the health check internally
CRE firms and other types of businesses can perform their own entity health check. If your organization decides to execute the health check internally, an internal auditor or someone from your legal team is usually assigned the task.
- Partner with an external provider to conduct the health check
On the other hand, firms may choose to partner with an external provider, like EntityKeeper, to conduct the entity health check. If your team takes this route, the provider will ensure that the check is thoroughly completed for you.
Ultimately, your team must weigh the pros and cons of both options to determine which is the better fit for your needs, budget, and time.
When should I complete an entity health check for my firm?
Some firms have the misconception that their organization can never lose its good standing status with the Secretary of State. However, this isn’t the case. While you may think you’ve crossed every “t” and dotted every “i”, it’s not uncommon for a document or reporting filing to unexpectedly slip through the cracks. If a mistake occurs and your team isn’t regularly monitoring your entity’s health, the problem may go unnoticed – until you are penalized with a fine or unable to legally conduct business.
A routine entity health check should be performed regularly to help you prevent any hiccups in your legal entity management. Although there is no requirement for when a health check must be completed, we recommend the following as optimal times:
- At the beginning or end of the calendar year
- Once a quarter
- Six months after a new entity is formed
Your organization can choose which time frame(s) best accommodate your goals and objectives. However, you should ensure that a health check is done at least once a year to avoid challenges and/or roadblocks.
Why might an organization choose not to conduct a health check?
An organization may opt not to conduct a health check regularly (or at all) for different reasons. However, some of the common responses we’ve heard include:
- Lack of knowledge about entity health checks
- Lack of time and/or resources
- Misconceptions about the costs associated with conducting a health check
- Uncertainties around how to begin or how to use the information they receive from the health check
No matter the reason, foregoing routine entity health checks may do more damage than good to your business in the long run. A consistent health check schedule can expose potential issues before they get out of hand. A proactive, regular routine could save your organization tons of time and money while giving you peace of mind.
How can I request an entity health check through EntityKeeper?
EntityKeeper has the knowledge and resources to perform an entity health check for all your entities. If you’re ready to partner with our team to receive a thorough, accurate, and actionable health check, you’ve come to the right place!
Contact us to see if you qualify for a complimentary entity health check!
