All states impose a reporting obligation on some or all of their domestic and foreign business entities. They also penalize companies that don’t comply, which is why it is so important to be familiar with this compliance requirement.
What is an annual report?
Statutory business entities — which include business corporations, nonprofit corporations, limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) — are generally required to file an information report with the business entity filing office of their formation state and of every foreign state in which they are qualified to do business.
The purpose of the requirement is to provide the public, investors, the filing office, and other government agencies with the information necessary to locate and communicate with companies formed or doing business in the state.
This is typically referred to as an annual report requirement for obvious reasons — in most cases, the information has to be provided every year and the document delivered to the filing office is called an annual report.
However, there are a few states where the filing is due biennially and a few states where the document is called something other than an “annual report” even when it is due annually. For example, some states call it a Statement of Information, a Periodic Report, or an Annual Registration.
Annual report filing requirements
One requirement imposed by the state corporation and LLC statutes is for corporations and LLCs to file an annual report in the formation state and every state where they are qualified or registered to do business. This requirement usually begins the year after formation or foreign qualification and continues until the corporation or LLC has formally dissolved in the formation state or withdrawn from the foreign state.
These are general rules. Some states require a report every other year instead of annually. A few do not have any information reporting requirements for some entity types. And some require an initial report within a short period of time of incorporation or foreign qualification.
Also, the information required to be set forth in an annual report differs from state to state. In fact, it can also differ within a state from business entity type to business entity type.
The business entity statutes prescribe the minimum required content. The filing office may be authorized to require additional information that will aid in the filing process. Typically, however, the report must set forth, at a minimum:
- The company’s legal name
- In the case of a foreign company, the fictitious name it qualified under, if any
- The principal office address in the state, if any
- The principal office address wherever located
- The registered agent’s name
- The registered office address
- The names and business addresses of directors and officers (for a corporation), managers and members (for an LLC) or partners (for an LP or LLP)
Filing details for annual reports
The states also vary greatly when it comes to filing details. For example:
- Some states require annual reports to be filed before a fixed calendar date. Other states have a due date based on the anniversary of formation or qualification.
- Some states prepare forms for each company, preprinted with the most current information on file. Others provide blank forms that must be filled out.
- In some states, the information report may be delivered to the filing office in paper form or electronically. Others will only accept reports that are filed electronically.
- Most states require a filing fee to accompany the report. The fee may be a flat rate or it may be variable. A variable rate may be based on a corporation’s authorized shares, the number of an LLC’s members or an LP or LLP’s partners, or some other basis. Some states charge nonprofit corporations no fee or a reduced fee.
What is the filing deadline for annual reports?
Knowing that you have to file is one thing. Keeping track of when you need to file can be something else entirely. This is because the time period for filing (or e-filing) the annual report varies widely from state to state. When multiple states are involved, it gets confusing in a hurry.
For example, Rose’s Buds Inc. is incorporated in State X. The business has grown steadily, and the company filed for foreign qualification in State Y and State Z.
Question: What annual report deadlines must Rose's Buds Inc. track?
Answer: Rose’s Buds Inc. must track the deadlines in all three states - State X, State Y, and State Z.
State X requires that Rose’s Buds Inc. file an annual report within the 60 days immediately prior to the first day of the anniversary month of incorporation. State Y requires a foreign corporation to file its annual report during the first quarter of the calendar year, regardless of the qualification date. And State Z requires a biennial report filing on April 1 of even-numbered years.
What happens if I don't file a required report?
The states impose penalties on companies that fail to comply with the annual report requirement. If the report is not filed by the due date a late fee will be charged.
Continued non-compliance can result in the delinquent company falling out of good standing. This means the state will not issue a certificate of good standing or file documents for the company. Further non-compliance can result in the administrative dissolution of a domestic company and the administrative revocation of the authority to do business as a foreign company, which means losing the many benefits of operating as an LLC or corporation.
Here are some other important things to know about annual reports.
Missing an annual report deadline can impact financing. An LLC or corporation that misses the deadline could lose its “good standing” status with the state, which can limit its financing options. Many lenders and funding sources may require good standing status, and they’ll ask you to prove it by producing a certificate of good standing.
Failing to file can lead you to lose a contract bid. A failure to file, and the resulting loss of good standing, could cost a company the bid - as contracting authorities may require proof of good standing status.
Annual report requirements continue even if you stop doing business in a particular state. Even if a company stops doing business in a state where it previously registered, it still has to file there until it properly withdraws from the state. Otherwise, there could be failure-to-file penalties.
Filing your state income tax return does not take care of your annual report requirement. State annual reports and state income tax returns are different things. Even if one has already been filed, the other still needs to be filed.
You still need to file, even if you've never received a notice. Although some states send reminder notices, not all do. Either way, you still have to file any required annual reports. The burden is on you to keep up with your deadlines and file on time.
Having a business license does not do away with your annual report filing requirements. Obtaining or renewing a business license is not the same thing as filing an annual report. Even if a company has all the necessary business licenses, it still needs to file its annual reports.
Avoid these common annual report filing mistakes
It’s not enough to just deliver your annual report to the filing office on time. You also want to avoid making mistakes that can result in the rejection of your filing. Some common mistakes in any state include the following:
- Filing an incomplete report
- Paying the incorrect fee or using an incorrect payment method
- Execution errors, such as failing to sign or date the report or having the report signed by someone not on the state’s records as authorized to sign
It’s also important to know the specific requirements that some states have. Failure to comply can result in rejections. Here are some examples:
- North Carolina requires a paper filing if the registered agent is being changed.
- New York advises that the biennial statement should not be filed before the calendar month in which the statement is due
- Delaware may reject a filing if a post office box is used for an address, or the required officer and director information is not provided
Making it even harder to avoid mistakes is that the states often change their requirements. Due dates change, fees change, paper filings may be eliminated, and so forth.
It’s also important to carefully complete the annual report form. If there are errors, such as spelling mistakes, that may not cause a rejection, but you will still want to correct the mistake and may have to file an amended report.
Conclusion
State corporation, LLC, LP, and LLP laws generally require the filing of a report with the state’s filing office. To avoid serious penalties, the individuals responsible for compliance for every company subject to this requirement should take all steps necessary to ensure that these reports are filed in a timely and complete manner.
Managing annual report requirements requires constant attention, especially if you have multiple entities across varying jurisdictions. Contact a CT Corporation representative to learn more about how to efficiently keep all your entities in good standing.
For more information on our annual report services, visit our annual report solutions.
