When you form your limited liability company (LLC), you realize benefits such as greater business legitimacy, protection of your personal assets, and more tax planning strategies.
But operating an LLC also brings ongoing compliance responsibilities, including filing annual reports and paying associated fees and/or franchise tax.
In this article we explain what you need to know about LLC annual reports, your filing responsibilities, and the consequences of failing to file or pay the required fees.
What is an LLC annual report?
Nearly every state requires their LLCs to file a report containing certain information and facts about the LLC. In most states this information report is required to be filed annually and is called an annual report. However, there are some states where the report is due biennially. And it might have a different name, such an LLC Statement of Information.
States generally require an annual filing because they consider it important that this information is freely available to the public and because many details about a business can change in the span of a year. Furthermore, a few states collect certain financial information about your LLC to determine the amount of franchise tax it may owe.
What are the penalties for not filing an annual report?
Filing late or not at all will have its consequences. Most states have a penalty for late filing. In addition, until the filing is made, your company will not be in good standing with the state. This can jeopardize your business’ ability to secure a loan, close contracts, or expand operations.
If you wait too long to file, your home state can dissolve your company and a foreign state (a state where you have business operations outside your home state) can remove your right to do business there.
A dissolved LLC can only conduct business necessary to wind up its affairs. If it conducts its regular business, the people conducting that business could lose their limited liability protection. Your company may also lose the ability to bring an action in state court, such as suing another party for breach of contract.
What information do you need to include in an annual report?
Although the information required varies by state, the following information is typically required in an annual report:
- Your company’s legal name
- In the case of a foreign company, its jurisdiction of formation and the fictitious name it qualified under, if any
- The principal office address in the state, if any
- The principal office address wherever it’s located
- The name of your registered agent
- The registered office address
- The names and business addresses of managers and members of the LLC
When is the annual report due?
The filing date for annual reports for an LLC varies from state to state and may even be different from other entity types within a particular state. The due date is determined by either a fixed date or a due date based on the anniversary of your LLC’s formation or qualification in that state.
However, in recent years, more states are moving towards the LLC formation anniversary date as the due date. This sounds logical, but that can make it hard for business owners to keep track of due dates. To complicate matters, due to a reduction in resources, many states have eliminated the practice of sending reminders to alert business owners that their annual report is due.
Another recent change is in how the annual report is delivered to the state. Many states are moving to online filings and may no longer accept paper filings. In some states there is no “form” and the required information is filled out on the filing office’s website.
To avoid fines and penalties, the burden for tracking all relevant due dates falls on the business owner. If you are registered to do business in more than one state, you may also have to file annual reports in each state — adding more to your plate.
Understanding franchise taxes
A franchise tax (which may also be called a license fee or registration fee) is imposed by states for the privilege of being organized or registered to transact business in that state in the form of a business entity. Think of it as the state’s fee for providing the statutory authority for your LLC to operate in that state and claim the benefits that come with being an LLC.
A state that imposes a franchise tax on an LLC may calculate the amount due in various ways. For example, it may be a flat fee or based business assets or gross revenue. In many cases, franchise tax is due at the same time that you file your annual report. However, certain states may have separate dates for each obligation.
Corporation annual reports
t’s also good to remember that corporations have annual report filing requirements too. So if you also own a corporation, or are planning on incorporating your business, you should be prepared to file an annual report for the corporation as well. As with LLCs, the compliance requirements vary by state but failure to comply will have the same unpleasant consequences.
Keeping track of your annual report deadline
The filing process itself isn’t hard but it can be time consuming. Furthermore, staying on top of those deadlines can be challenging, especially if you do business in more than one state. To ensure you stay on top of all filing requirements, be sure to mark your calendar and add a reminder so that you leave yourself enough time to prepare and file your next report. To provide peace of mind, an annual report service can help ensure your reports are filed accurately and on time.
For more information on LLCs, see How to form an LLC: What is an LLC, advantages, disadvantages & more.
Learn more about BizFilings’ Managed Annual Report Service.
