As we enter a new year, it’s time to evaluate what worked and what needs improvement.
When you formed your company with the state—whether you opted for a corporation or an LLC—you filed initial formation documents that provided the state with basic information about your company and appointed a registered agent. Those two steps completed the formation process. However, they were not the end of your obligations to the state.
As long as you continue to operate as an LLC or corporation, you must maintain a registered agent. And, most states require that you file an annual report that supplies current information regarding your company.
- Tip: If you expand your business into another state, you will need to maintain a registered agent and file an annual report in every state where you have registered to do business.
Your Registered Agent is Your Official Representative
Your Registered Agent is the state’s official point of contact for your business. The state sends important compliance information (such as annual report notifications, state communications and state tax forms) as well as other official correspondence to your registered agent, who then forwards those documents to the appropriate contact person in your business.
In addition, the registered agent receives service of process, which is the legal paperwork that gives your company official notice of a lawsuit. Other important legal documents the registered agent may receive include wage garnishment notices and subpoenas. Given the importance of the documents that the registered agent handles, it is essential that your agent be competent and experienced. With official notifications, time is often "of the essence" and a professional registered agent, such as BizFilings, is best equipped to handle the task effectively.
- Tip: A registered agent must be a resident of the state or a domestic or qualified corporation or LLC. For this reason, once a business expands beyond a single state, the owners often elect to have one professional registered agent handle all registered agent responsibilities.
Annual Report Filings Keep the State’s Records Current
Nearly every state requires a periodic report that updates an LLC's or corporation's basic information, such as the principle business location, officers' (or managers') names, and the name and address of the registered agent. Most states have an annual requirement, which is why this is generally known as an Annual Report. However, a few have a Biennial Report requirement, as they require a report only every other year. In some states, the franchise tax requirement is tied to the annual report filing requirement. In Delaware for example, the annual franchise tax report is used to calculate the franchise tax and update the basic information.
States also vary widely regarding the due dates for the annual reports. Although many do require a report to be filed in the spring, that is certainly not always the case. Moreover, many states tie the annual report due date to the anniversary of the company's formation. While most states have a penalty for missing the deadline, some states prohibit a company from filing too far in advance of the due date.
Failing to Comply Can Result in Loss of Good Standing and Administrative Dissolution
Failing to maintain a registered agent or failing to file the annual report within the period allowed by the state can have serious repercussions. A company that does not meet these obligations will forfeit its good standing with the state. This can jeopardize expansion plans and financing opportunities as a certificate of good standing is routinely required to register to do business in a new state and to obtain many types of financing.
- Tip: Criminals intent on stealing a business’s identity will pay attention to which companies have missed the filing deadlines. They reason—and often quite correctly—that a company that doesn’t pay attention to deadlines, won’t notice if a change of company information is filed. And, this change of information opens the door to a wide variety of fraudulent purposes and brand-jacking.
The state can administratively dissolve the company if the failure to comply continues long enough. Once administratively dissolved, the company can no longer conduct its usual business and anyone doing business on its behalf may be held personally liable for company debts incurred during that period. An out-of-state company can have its certificate of authority revoked, depriving it of the right to bring lawsuits and increasing the risk of exposure to its owners. Fines and interest charges can also be imposed on the company; and, in some states, fines can also be imposed on the owners.
Annual Report Management Services Protects Your Company
You can’t run a small business without being ready to tackle whatever comes your way. But, sometimes it makes sense to enlist the help of a seasoned professional to make sure that the job is done efficiently and correctly. Managing your annual report filings often fall into that category—particularly if you are doing business in more than one state.
An annual report managed service:
- Alerts you that an annual report is due
- Confirms accuracy of the requested information
- Makes any needed updates on the state required forms
- Files the form with the state
- Notifies you of the successful filing
Ensuring that your report is filed correctly and on time is the most obvious benefit of using an annual report managed service. But there is a more subtle benefit. You do not have to try and determine if there have been any law changes that affect your company. Your compliance partner handles the ongoing monitoring of all the states in which you are doing business.
Registered Agent + Annual Report Services = Compliance Nirvana
The best way to prevent compliance obligations from falling through the cracks with disastrous results is to leverage the power of your professional registered agent by allowing your registered agent to manage your annual report obligations. The registered agent is in an ideal position to make sure you stay on track because the agent receives official communication from the state.
In addition your agent knows whom to contact within your company to verify information and make needed updates. A professional registered agent company, such as BizFilings, monitors the developments within each state and can alert you when there are changes and help you remain in compliance.
If you operate in multiple states, working with a single registered agent company can ensure that your information is correctly provided to all the jurisdictions and any state-required documents are filed in a timely manner. Missed deadlines and paperwork snafus can derail your business. Empowering your registered agent to handle your annual compliance can prevent that from happening.