Remember the days when you had to file a document with the secretary of state (or equivalent office) and they provided you with a paper document that you could mail in or bring to their office in person? Those days are rapidly disappearing. State agencies are moving away from paper filings and shifting to online filings instead.
What are the states' approaches to digitalization?
Although the shift towards online filings can be seen in practically every state, each state is approaching digitalization at their own pace. In some states, most business entity and UCC filings can be made either online or in paper form. In other states, some documents must be filed online (annual reports or UCC documents for example) while other documents can be filed either online or in paper form. However, a more recent trend is for states to go entirely paperless and require all business entity and UCC filings (although there may be some exceptions, such as merger filings) to be made online. This trend can be seen in states like Colorado, New Mexico, Montana, and Mississippi.
What are the advantages of online and paperless filings?
States are shifting toward online and paperless filings for several reasons. There are advantages for both the filing office and the filer. The benefits include the following:
- Faster processing times
- Online filings can be processed faster than paper filings because they go directly into the filing office's workflow, without waiting for mailed documents to arrive and be manually processed.
- Lower administrative costs
- Online filing reduces costs associated with paper forms such as printing, mailing, storage, and manual processing.
- Better access to records and information
- Online systems can make it easier to track the status of filings, retrieve records, and obtain information.
- Reduced data-entry errors
- Direct entry by the filer reduces the clerical errors that can occur when state employees manually enter data.
- Faster verification of payment
- Payment for online filings may be made by various methods, depending on the state, including a prepaid or funded account, ACH, credit or debit card. This eliminates checks and allows a filing office to verify immediately that the credit card or account has the funds to pay the filing fee.
- Reduced fees for filers
- To encourage online filing in states where it is optional but not required, some states offer a lower filing fee for online filing.
- Better for the environment
- There is also the benefit to the environment of reducing paper use.
What are the disadvantages of online and paperless filings?
There are also disadvantages that have come to light as the states shift to online filing. These include the following:
- Increased exposure to fraud
- The states’ shift to an online filing process has coincided with an increase in reported issues of business filing fraud, which can involve individuals submitting unauthorized filings altering existing information and using it to obtain loans or facilitate other criminal activities or forming new entities using false or stolen personal formation.
- Technical failures can delay filings
- If the state’s filing portal is down or there’s no internet access, a time-sensitive filing may be delayed.
- Increased technical difficulty in submitting online filings
- Online filings often require setting up accounts, navigating portals, figuring out complex payment methods, and otherwise can be challenging for some people more used to paper based transactions.
Why it’s important to know if a state permits or requires online filing
Filings will be rejected if submitted in an improper format or by an improper method. This can have serious negative consequences for anyone making a time sensitive filing. It is important to keep track of what method of submission the states are accepting for each document being filed. Unfortunately, some states give little warning before announcing that they have gone completely online and will reject paper filings.
CT Corporation is closely monitoring this fast-moving trend toward digitalization of business entity and UCC filings and is well positioned to assist our customers in filing their documents in compliance with the state agencies’ current filing requirements. You can contact us for additional information.