All states impose a reporting obligation on 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 information report with the business entity filing office of their formation state and of every foreign state in which they are qualified to do business.
The purpose of the requirement is to provide 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 is typically referred to as an annual report requirement for obvious reasons—in most cases, the information has to be provided every year and the document delivered to the filing office is called an annual report. However, there are a few states where the filing is due biennially and a few states where the document is called something other than an “annual report” even when it is due annually. For example, some states have called it a Statement of Information, a Periodic Report, or an Annual Registration.
The information required to be set forth in an annual report differs from state to state. It can also differ within a state from business entity type to business entity type.
The business entity statutes prescribe the minimum required content. The filing office may be authorized to require additional information that will aid in the filing process. Typically, however, the report must set forth, 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 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)
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 rate or it 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.
Failure to file
The states impose penalties on companies that fail to comply with the annual report requirement. If the report is not filed by the due date a late fee will be charged. Continued non-compliance can result in the delinquent company falling out of good standing. This means the state will not issue a certificate of good standing or file documents for it. Further non-compliance can result in the administrative dissolution of a domestic company and the administrative revocation of the authority to do business of a foreign company, which means losing the many benefits of operating as an LLC or corporation.
Here are some other important things to know about annual reports:
Missing an annual report deadline can impact 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 may require good standing status, and they’ll ask you to prove it by producing a certificate of 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 has to 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 have to 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.
State corporation, LLC, LP and LLP laws generally require the filing of a report with the state’s filing office. In order 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 on annual reports see annual report myth busters, our annual report solutions, or talk with us today.