What is An Annual Report?!
All states impose a reporting obligation on some or all their domestic and foreign business entities. They also penalize companies that don’t comply, which is why it is so important to be familiar with this compliance requirement.
What is an annual report?
Statutory business entities — which include business corporations, nonprofit corporations, limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) — are generally required to file an annual report each year. The report is essentially an information report the business files with the Secretary of State (or other entity filing office) where they were formed and every foreign state in which they are qualified to do business.
This filing provides the public, investors, the filing office, and other government agencies with the information necessary to locate and communicate with companies formed or doing business in the state. This report is required to be filed, in most cases, every year, however, there are a few states that require the report every two years or call it something different.
Annual report filing requirements
The requirement to file the annual report usually begins the year after formation of the entity or foreign qualification and continues until the company files to dissolve (formally end) or withdraw from the foreign it is registered in. An example of this is an LLC that was formed in March of 2021, would not be required to begin filing its Annual Report until 2022.
Of course, this is the general rule as some states only require the report every other yea, do not have any information reporting requirements, and some require an initial report within a short time of incorporation or foreign qualification.
As with most things, the specific information required in the report varies based on entity type and from state to state so it is important to review your state’s requirements. There are third party services that offer to complete and submit your Annual Report for you, but before hiring one you should ensure they know the requirements for your respective state(s).
Each state has laws on the business entity types which establish the baseline required information to be included in the report. The Secretary of State’s office may be authorized to require additional information they believe will assist with the filing process. However, the report generally must include, at a minimum:
- The company’s legal name
- In the case of a foreign company, the fictitious name it qualified under, if any
- The principal office address in the state if any
- The principal office address wherever located
- The registered agent’s name
- The registered agent’s office address
- The names and business addresses of directors and officers (for a corporation), managers and members (for an LLC) or partners (for an LP or LLP)
Filing Details for Annual Reports
The states also vary greatly when it comes to filing details. For example:
- Some states require annual reports to be filed before a fixed calendar date. Other states have a due date based on the anniversary of formation or qualification.
- Some states prepare forms for each company, preprinted with the most current information on file. Others provide blank forms that must be filled out.
- In some states the information report may be delivered to the filing office in paper form or electronically. Others will only accept reports that are filed electronically.
- Most states require a filing fee to accompany the report. The fee may be a flat fee or may be variable. A variable rate may be based on a corporation’s authorized shares, the number of an LLC’s members or an LP or LLP’s partners, or some other basis. Some states charge nonprofit corporations no fee or a reduced fee.
What is the filing deadline for annual reports?
Some states require the report to be submitted on a set date, but some use the company’s formation date as the due date. It is important to know your state’s due date and stay up to date on any changes made from year to year. Some states will send a reminder notice in the mail or via email letting you know the report is due soon. Unfortunately, this is not the case for every state. If your business operates and is registered in multiple states it is your responsibility to keep up with the filing requirements for each state.
What happens if I don’t file a required report?
Failing to file the annual report results in fines being assessed and/or the business being limited or prevented from conducting business in the state. If the report is not filed by the due date a late fee will be charged. As more time passes without the report being filed, the company may fall out of good standing. Extended or excessive non-compliance with the annual report filing can result in an administrative dissolution (closure) of the business. If this happens, owners of the company lose the benefits of operating as an LLC or corporation. Your business does not automatically close or stop, but the protections associated with an LLC or corporation cease to exist and you expose yourself to more risk and liability.
Some Important Things to Know about Filing the Annual Report
- Missing an annual report deadline can impact current or potential financing. An LLC or corporation that misses the deadline could lose its “good standing” status with the state, which can limit its financing options. Many lenders and funding sources require certificates of good standing. This cannot be produced if the state has determined that the company is not in good standing.
- Failing to file can lead you to lose a contract bid. A failure to file could result in a loss of good standing—and that could cost a company the bid. Properly filing timely annual reports helps maintain a company’s good standing status in state records and keep it on track for success.
- Annual report requirements continue even if you stopped doing business in a particular state. Even if a company stops doing business in a state where it previously registered, it still must continue to file there until it properly withdraws from the state. Otherwise, there could be failure-to-file penalties.
- Filing your state income tax return does not take care of your annual report requirement. State annual reports and state income tax returns are different things. Even if one has already been filed, the other still needs to be filed.
- You still need to file, even if you’ve never received a notice. Although some states send reminder notices, not all do. Either way, you still must file any required annual reports. The burden is on you to keep up with your deadlines and file on time.
- Having a business license does not do away with your annual report filing requirements. Obtaining or renewing a business license is not the same thing as filing an annual report. Even if a company has all necessary business licenses, it still needs to file its annual reports.
- Annual report filing requirements continue even after forming your company. Just like tax returns and business licenses, formation and incorporation filings are different from annual report filings. After forming an LLC or corporation, a “next step” is to file state annual reports.
Common Filing Mistakes
It’s not enough to just submit your annual report on time. You want to make sure it’s completed correctly to avoid your filing being rejected. Some common mistakes include the following:
- Filing an incomplete report
- Paying the incorrect fee or using an incorrect payment method
- Having an unauthorized person sign or signing in the wrong place.
State corporation, LLC, LP, and LLP laws generally require the filing of a report with the state’s filing office. To avoid serious penalties, the individuals responsible for compliance for every company subject to this requirement should take all steps necessary to ensure that these reports are filed in a timely and complete manner.
For more information or assistance with filing your Annual Report Contact Us Today.