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Managing Annual Reports By Yourself Can Be Tricky And Risky

Published on Jul 8, 2015

Summary

Use a managed annual report service to help you meet multi-state filing deadlines when you are registered to do business in multiple states.
annual report

Incorporating or forming your limited liability company (LLC) provides you with increased business legitimacy, more tax planning strategies and protection for your personal assets. But, along with these great benefits come ongoing responsibilities. One of these is filing an annual report with your formation state and with every state where are have registered to do business as a foreign corporation or LLC.

This annual report isn’t the exhaustive financial statements provided by major corporations to shareholders, analysts, and regulators. Instead, it provides basic contact information and facts about your corporation or LLC, such as the names and addresses of your registered agent and directors/managers.  Some states, like Delaware, may collect some financial information because they also use the annual report to determine the amount of franchise tax your company owes.

Missing a deadline or, worse yet, forgetting to file can result in serious consequences. Nearly every state will charge you a penalty for late filing. And, if too much time goes by, the state can dissolve your company or withdraw your right to do business. This means you may lose your limited liability protection. You may also be unable to bring an action in state court. In a recent case, an award of damages was set aside—even though the defendant admitted complete liability—because the corporation did not have standing to bring an action in court.

What’s more, scam artists are known to troll secretary of state websites looking for businesses that are out of compliance. Then, with a few clicks of mouse, they are able to steal your business’s identity and use that identity to open credit cards and obtain products—that you may well be on the hook to pay for.

It’s one thing to know that you are going to have to file one or more annual reports. It’s an entirely different thing to keep track of all of the various deadlines and requirements. Why? Because in about one-half of the states, your annual report filing deadline is based on your incorporation, formation, or foreign qualification date.

These states take this “anniversary date” as the starting point and then provide a period of time during which the annual report is due. For example, one state might expect you to file an annual report at some point during the three-month period beginning with the first day of the entity’s anniversary month. Yet, a neighboring state may require filing during the anniversary month itself. And, like Goldilocks, states want the compliance date to be “just right.” Every state will penalize you for filing too late—and some will penalize you for filing too early.

If you are incorporated and do business in only one state, the situation is manageable. But, when multiple states are involved, it gets confusing in a hurry.

Take “Peter’s Pan Pizza” for example. Peter incorporated in State A on July 3, 2013. Business was good. On November 27, 2014, Peter registered to do business in State B and on December 27, he registered in State C.  In addition to running his restaurants, Peter must track compliance deadlines in all three states. State A requires an annual report filing within the 60 days immediately preceding the first day of the anniversary month—in May or June of each year. State B requires a foreign corporation during the first quarter of the calendar year—sometime in January, February or March. State C requires filing on April 1 only in even-numbered years—April 1, 2016.

Not only is it a nuisance to track all of the various deadlines and stay on top of the information required, it less likely that you can count on help from the state to jog your memory. In these times of budget shortfalls, more and more states are eliminating reminders of upcoming filing deadlines.

If you are not anticipating expanding beyond your home state—and you have the time and inclination to track filing deadlines and rules—a do-it-yourself approach might be feasible. But, it may not be the best use of your time and energy as you are immersed in a thousand-and-one “to-do’s” necessary to drive your business forward. If you operate in multiple states, retaining professional assistance becomes an even wiser decision. BizFilings' Managed Annual Report Filing Service monitors, manages, and files each of your annual reports—on time and according to state specifications—ensuring that your business stays in compliance.