Make Your Businesses Invulnerable to Corporate Identity Theft Failure to keep up-to-date with corporate compliance chores can put your business, and you personally, at the mercy of criminals.

By Jennifer Friedman

Opinions expressed by Entrepreneur contributors are their own.

The news is full of highly sophisticated cyberattacks against major corporations, but some of the ways entrepreneurs can become targets are surprisingly low-tech.

In fact, failing to file seemingly minor forms can leave entrepreneurs vulnerable to crimes that can destroy their credit, their reputation and even their businesses.

It's relatively easy to incorporate a business in the United States. This is a good thing, because new businesses drive economic growth, build wealth and create jobs.

However, once a business is incorporated, there are simple details that need attention to ensure the company remains compliant with state law. Unfortunately, the repercussions of falling out of compliance can stretch far beyond fines and minor inconveniences.

While many entrepreneurs are knowledgeable about personal identity theft, they aren't as prepared against thieves stealing their business identity. Certain simple mistakes, such as forgetting to file annual reports or failing to dissolve a defunct company properly, can open the door for criminals looking to impersonate and defraud a business.

Related: Beware of a New Kind of Business Identity Theft

How entrepreneurs become vulnerable.

Incorporated companies are required to file annual reports in most states. These are simple documents that keep the state up to date on basic information about your business.

When a company fails to file an annual report on time, it may face "administrative dissolution" from the state. This means it is no longer considered incorporated in that state and can face fines if it remains in business without properly registering. It can also mean that the company loses access to the state's courts, among other legal protections.

In addition, businesses that fall into administrative dissolution wind up on state lists of "inactive companies." By utilizing a different mailing address, criminals can work to get the company reinstated without the owners' knowledge. They can then receive a certificate of good standing for the business, with which they can open up lines of credit or order merchandise that can easily be resold.

Scariest of all? If the business has been administratively dissolved, this means the owner lacks the personal liability protection of the corporate form, and the debts run up by criminals would therefore hit the business owner directly in the pocketbook.

While administrative dissolution may occur because of an error on the part of the company, sometimes owners decide they wish to shutter the business, but end up falling out of compliance.

Simply closing the doors is risky. A company that is not formally "wound down" in the eyes of the state is in "no-man's land," so to speak, the opportunity remains for criminals to usurp the business identity, run up debts and wreak other havoc.

Related: 11 Ways to Protect Your Business From Cyber Criminals

How entrepreneurs can protect themselves.

File on time: Filing your annual reports correctly and on time is a de minimis expense when compared to facing corporate identity theft. Busy business owners can easily forget annual reports since the filing dates are often timed to the date the company was formed, not to its fiscal year or around tax deadlines. When businesses need to file in different states, the logistics multiply. Trusted advisors such as your lawyer or your registered agent can help to keep you informed of deadlines.

Legally dissolve a defunct business: When entrepreneurs decide to end a business venture or exit a state, they need to do so formally. While dissolution requirements vary from state to state, legally dissolving usually involves preparing and submitting documents to the state and, in some cases, to the IRS. Otherwise, the defunct corporate identity remains vulnerable. Again, your registered agent can keep you informed about these requirements.

Formally withdraw from states where you no longer operate: While dissolution terminates the legal existence of a company throughout the country, withdrawal merely eradicates a company's right to do business in a particular state -- the company can continue to do business elsewhere. If you are sure you will no longer be doing business in a state, it's a good idea to tie up any loose ends criminals could potentially exploit.

Run periodic business credit checks: Just as you would run a personal credit check, running regular business credit checks through the various credit reporting agencies gives you peace of mind that nobody is running up debts in your name., a joint project of the Identity Theft Protection Association and the National Association of Secretaries of State, is a good online resource for more information. The project brings together state government officials, business owners, law enforcement, financial industry representatives and other key stakeholders to fight against business identity theft.

Compliance can foil cybercriminals. For small business owners, it's easy to forget about a form that needs to be filed. But criminals tend to be opportunists. They would rather rob an empty house, instead of a well-lighted home with a security system. By being vigilant, staying in compliance with filings and partnering with the right people, entrepreneurs can make themselves such formidable targets that would-be criminals will pass them by.

Related: Protect Your Business with 5 Social-Media Security Tips

Wavy Line

As the CMO of the small-business segment of Wolters Kluwer CT Corporation, Jen Friedman is responsible for growing revenue through brand, digital and direct marketing. CT Corporation provides formation,incorporationregistered agent and other services to businesses of all sizes, and was the first public registered agent to formally offer benefit corporation entity services.

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