Entity management is the process of organizing and filing an organization’s legal entity documentation, including (but not limited to) annual reports, business registrations, DBA / fictitious names, and business licenses.
The goal of entity management is to maintain organizational compliance with local, state, and federal jurisdictions. And, while the process of managing entities can be a slog, adhering to best practices is critically important – the price of noncompliance is high (literally and figuratively). More on that below.
An effective entity management process generally requires buy-in from and collaboration between multiple departments (including legal, finance and human resources). For the process to work as it should, documents must be well organized and easy for relevant stakeholders to access. Transparency is key.
Specific entity obligations vary by industry and jurisdiction.
That said, here are a few common responsibilities:
There’s no doubt about it: entity compliance is complicated. And, while entity management has always been challenging, it has become exponentially more difficult in recent years. The number of entities most organizations have to manage has skyrocketed alongside the rise in remote work and the inescapability of globalization.
At a high level, here are some of the most challenging aspects of maintaining entity compliance:
Yes, they unfortunately are.
Because the work of managing entities is so – frankly – boring, it’s easy to assume that the stakes are relatively low. Who really cares about a missed filing?
Well… a lot of people, it turns out.
Noncompliant entities rack up fines, fees, and interest. At the most extreme level, missing – aka orphaned – entities can derail deals or make your organization vulnerable to litigation. No one wants that.
Getting entities back into good standing is expensive and frustrating. But that’s not all – there is a huge opportunity cost at play too. Every hour your organization spends addressing (completely avoidable!) noncompliance is an hour that could be spent doing actually valuable work.
But, if you suspect your organization has a compliance problem, don’t worry. Entity compliance issues are both fixable and highly common. In fact, among the gaps found in Filejet audits, 66% of clients have noncompliant entities and 44% have orphaned entities.
If your organization’s entity management process is manual (think spreadsheets and calendar reminders) it is extremely likely that something is awry. Even if all of your entities are seemingly compliant (are you absolutely, positively sure they are?), being mired in “Excel Hell” means your entities could, at the very least, be handled more efficiently.
The bottom line is this: for a majority of organizations, a manual entity management process simply doesn’t cut it. A manual process isn’t advanced, transparent, or collaborative enough to assure you the job is getting done. And it certainly can’t give you peace of mind. (Seriously, has a spreadsheet ever made you feel relaxed and confident?)
Yes! Yes, you do need an audit trail.
If internal or external audits ever need to be conducted for regulatory purposes, it is necessary to have a reliable account of changes made to and action taken on your organization’s entities.
But audit trails are about more than just covering your tail – they also help organizations maintain their entities competently and efficiently. Dependable audit trails make it easy to quickly spot errors and inconsistencies, so they can be addressed before they turn into a four-alarm fire.
When entities are managed manually, maintaining a reliable audit trail is nearly impossible. Have you ever succeeded at tracking changes on a spreadsheet? What about a years-old spreadsheet? What about one that has passed through dozens of hands? You get the point.
Employees leave. They get promoted. They transfer departments. It’s just the nature of the beast.
And, while turnover is a natural part of the business cycle, it can cause some serious issues if entities are managed manually. When employees responsible for entity compliance leave, tribal knowledge leaves with them. If no single source of truth remains (and it cannot if entities are managed on a spreadsheet) it is almost inevitable that some entity information will slip between the cracks.
If your organization values consistency in how data is organized, updated, and accessed – and wants to remain legally compliant! – steer clear of manual entity management. An effective (and automated) process will help you avoid compliance issues when unavoidable personnel changes occur.
Yes, you can outsource entity management – and many do! But… proceed with caution. The legal compliance market is crowded and filled with “solutions” that may not be the right fit for your organization. And you don’t want to swap one poor process for a poor process you also have to pay for.
When looking for an entity management provider, seek the following characteristics:
Now, for many organizations, the right entity management provider will tick all of those boxes but also – and this is important – deliver an automated software solution. But be wary here. Many entity management “software” platforms are little more than spreadsheets (ugh) hidden behind slick interfaces.
For true compliance peace of mind, look for a provider who can automate any aspect of entity management that can be automated – but also has a reliable and responsive back-office team ready to do the work that must be done manually.
Any software solution worth its stuff must be:
If, over the course of reading this page, you have come to the realization that yes, you have a compliance issue and yes, you are ready to address it, congratulations! You are already on your way to achieving problem-free (and stress-less) entity compliance.
With a combination of software and service that is unparalleled on the market, Filejet is the entity management solution you don’t have to think about – unless you want to.
Filejet automates U.S. and international annual report, business registration and DBA filings – and does it all on a dashboard that provides instant visibility into entities, fees, filing dates, and documents. Any work that can’t be automated is handled by the Filejet team, who does that it takes to ensure clients never fall out of compliance.
The result? You spend less time, money, and physic energy on entity management. Filejet does the heavy lifting – and delivers the entity compliance peace of mind you’ve been dreaming of.