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Four Facts You Must Know About Annual Reports
Published on Feb 23, 2015
Failing to file and annual report for your corporation or LLC can expose you to personal liability, identity theft, and entity dissolution.
By Marcia Richards Suelzer, M.A., J.D.
When you formed your LLC or incorporated your company, your business became an official entity in the eyes of the state. This status as a separate entity is what protects your personal assets from business creditors and liability. But, this separate existence also creates ongoing compliance responsibilities in the formation state. And, if your business expands to other states, you will face ongoing compliance duties in each state where you register as a foreign corporation or LLC.
One of the most crucial of these ongoing compliance obligations is filing an annual report. The term “annual report” is used in a variety of contexts. It’s not uncommon for people to hear “corporate annual report” and think of the detailed, multi-page document that published by publicly traded corporations to inform shareholders, regulators, industry analysts, and potential investors about the company’s financial well-being. Fortunately, this elaborate and detailed exploration of the company’s fiscal health and future plan is not required for a state-mandated annual report.
The state annual report is designed to provide the public and government officials with the information necessary to determine who owns the company and how to contact the company. So the forms generally require only:
Company name and address
Officers / Managers / Directors names and addresses
Registered agent name and address
Some states, such as Delaware, combine the annual reporting requirement and their franchise tax assessment. In that case, the form will also ask about shares authorized and issued and/or value of the company assets.
Now that you know what an annual report is (and isn’t), here are four more facts you must know.
Virtually every corporation and limited liability company will need to file an annual report this year in its state of formation and in every state where it has registered to do business. There are a few states (such as Indiana and New Mexico) that require a filing every other year, but in most it is an annual obligation.
Due dates vary from state-to-state and in some states, by entity type. If would be nice if there was a single, national due date for annual reports, but that is not the case. Each state sets its own due dates. And, the deadlines may be different for a corporation and an LLC, so it is important to keep track of the correct date for your company type. For example, a Delaware corporation must file its annual report by March 1, but an LLC’s is not due until June 1.
What’s more, most states don’t have a due date tied to the calendar. Many times, the date for the return is tied to the date the company was formed, incorporated or registered in the state. In other states, the due date is tied to the company’s fiscal year. For instance, the due date in Nevada is the last day of calendar anniversary month of incorporation, formation or qualification. If you operate in multiple states, keeping track of due dates can become time-consuming.
Not every state sends reminders. Back in the day, most states sent reminders well in advance of the filing deadline and often supplied the form for the business to complete and return. In many states, that no longer is the case because courtesy notices were among the first items trimmed from state budgets during the recent economic slowdown. In addition, more states are encouraging electronic filing. Some states, such as Connecticut, online filing is mandatory As the states have become less helpful, the value of partnering with a company such as BizFilings becomes more valuable in staying on top of filing obligations.
Failing to file can be disastrous. Complying with the annual reporting requirement is one of the prices paid for legal recognition of your company. Failing to file can cost your company its “good standing” in the state. Proof of good standing is generally required to obtain financing, enter into contracts, or merge with another company. A certificate of good standing is also required to register your company in another state. What’s more, failing to file can result in the state stepping in and dissolving your company.
Dissolution will prevent your company from bringing a lawsuit to enforce a contract or obtain damages. Dissolution can also expose you to personal liability for business debts and liabilities. And, you may be personally liable for fines and penalties imposed by the state.
Failure to file – or to file on time – also alerts business scammers that you are not paying attention to your company’s compliance responsibilities. These criminals often assume that if you aren’t watching deadline, you aren’t watching information and this gives them a green light to file a few simple papers with the state and hijack your business identity. Once they have assumed your identity, they can use that information to open lines of credit, make purchases and abscond with the illegally purchased assets—leaving you liable for the debts.
Staying on top of your ongoing compliance responsibilities can be made easier if you work with a trusted business provider, such as BizFilings. But, whether you partner with a business professional or take the do-it-yourself route, it is essential that you know the annual report filing date for each corporation and LLC that you operate and make sure to file (and pay the state fees) by the deadline.