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Beware of “Annual Records” Scams!
Published on Feb 26, 2015
By Marcia Richards Suelzer, M.A., J.D.
It is unfortunate, but there is always someone ready to use trickery or deception to make a fast buck off of virtually every aspect of daily life. You’ll see fake charities pop up after every disaster, and most of us have received at least one email asking for us to help a down-on-his-luck Nigerian prince. For the past several years, many businesses have been targeted by companies who engage in deceptive practices related to corporate recordkeeping and annual report filing requirements.
As we discussed in our earlier post, “Four Facts You Must Know About Annual Reports,” nearly every corporation and LLC must file one or more annual reports with state governments during 2015. Keeping up with annual report filing can be challenging due to lack of uniformity in due dates. Given that the consequences can be dire, it often makes excellent sense for the small business owner to partner with a trustworthy business compliance company that he or she knows and trusts, such as BizFilings. This strategy makes even more sense when that company already provides your business with registered agent services.
Unfortunately, there are a number of untrustworthy companies out to take your hard-earned cash by offering “annual record services” that are not required and cannot satisfy your annual report filing requirement. How can you spot these scams?
The company’s name may not be a give-away. Many of these outfits try to mimic names of reputable business compliance companies. For example, the Delaware secretary of state’s website warns Delaware companies to beware of the “Corporate Records Service,” as does the secretary of state of Illinois. While Corporate Records Service seems to be one of the most common names used, it is not the only name. Rhode Island secretary of state’s website warns its filers about the two such companies: "Annual Business Services" which is sending letters and “Rhode Island Corporate Compliance (RICC)” which is sending emails to companies registered in Rhode Island.
So, what should alert you? The following are common red flags:
You receive a letter from an unfamiliar company, not the company that serves as your registered agent or that helped you incorporate or form your LLC.
The envelope and form are designed to fool you into thinking that it is an official government communication. There will be quasi-governmental seals and be many citations to state statutes and provisions. While there is likely to be a disclaimer that it is sent by a private company, the overall tone and appearance of the communication strongly conveys the opposite impression.
There be an official-looking form with a title similar to “2015 Annual Minutes." If you are curious what one version of this form looks like, the Milwaukee-Wisconsin Journal Sentinel reproduced a copy of the form in its story about the scam operating in Wisconsin last year.
There will be a demand to return the form to the corporation by a specific date. As the Indiana Secretary of State’s website warns, “They include a return by date to give the false impression that action is necessary on your part.”
There is a fee of $125 payment for the service.
There are two major dangers with this scam. (Three, if you count throwing away $125.)
First, this bogus communication may cause you to miss the state filing deadline. These solicitations are timed to correspond with the annual report due date. The company is banking (literally) on the similarity in name the name of their form, “Annual Records,” and the state-required filing, “Annual Report,” to inspire business owners to complete their form. And, the similarity may fool business owners into thinking that they have compiled with the state filing requirement. This may result in fines, penalties, loss of good standing and dissolution.
Second, your information may not be adequately safeguarded. The form sent requests information in excess of what you are generally required to provide to the state. For example, the form requests a list of all of the shareholders’ names. The only guarantee you have that any information provided, including your credit card number, will be safeguarded and not released to third-parties is the assurance provided on the form. And, when you consider that Corporation Records Service is under investigation for fraud in multiple states—and has agreed to numerous consent judgments related to deceptive practices–your faith in the disclaimer may be ill-founded.
What should you do if you receive mail that asks you to provide information to prepare your annual minutes or consent records?
You can simply shred the correspondence and toss it into the recycle bin. However, you may wish to report the solicitation attempt by contacting your secretary of state’s office. The secretary of state can advise you on how best to proceed in your jurisdiction. If you are not sure if what you received is a scam or a legitimate offer to help streamline your paperwork responsibilities, the compliance experts at BizFilings will be glad to answer any questions that you might have. You can contact one of our customer service specialists at 800-981-7183.