Managing annual reports by yourself can be tricky and risky, especially when you are dealing with businesses in multiple states. Using a managed annual report service can help you meet various filing deadlines when you are registered to do business in more than one state.
An annual requirement for LLCs and corporations
Forming a limited liability company (LLC) or Incorporating your business provides increased legitimacy, more tax-planning options, and protection for your personal assets. But, along with these great benefits come ongoing responsibilities. One such responsibility is filing an annual report or, in a few states, a biennial report) with your formation state and with every state where you have registered to do business as a foreign LLC or corporation.
What is the purpose of filing an annual report?
The purpose of the annual report is to keep the state's records current, ensuring it can identify, locate, and communicate with every company authorized to operate there.
An annual report provides basic contact information and facts about your LLC or corporation, such as the names and addresses of your registered agent and your company’s directors or managers. (It is not the same document that public companies provide to shareholders, analysts, and regulators.)
What are the consequences for not filing an annual report?
Filing your annual report late, or worse, not filing at all, can result in serious consequences for your business.
Nearly every state will charge a penalty for late filings. And until the filing is made, the company can fall out of good standing with the state. (“Good standing” means a company has filed all required reports and paid all required fees with the state.) The loss of good standing status can jeopardize the company’s ability to get a loan, complete deals, or expand operations.
If too much time goes by, the home state can dissolve your company, and any foreign state can revoke your company’s right to do business there. This means you may lose your limited liability protection. You may also be unable to bring an action in state court. Even if you do bring a case, and the defendant admits complete liability, the court can set the award aside because your company lacked standing to sue.
What’s more, scam artists are known to scour Secretary of State websites looking for businesses that are out of compliance, hoping to steal their identities. By filing the overdue paperwork themselves, these criminals can make it appear that they are acting officially on behalf of your business. They may then change the company's address or contact details with the state and use that authority to open credit cards or take out loans under the name of your business.
Why annual report compliance can be challenging for multi-state businesses
Knowing you have to file one or more annual reports is one thing. Keeping track of the various deadlines and requirements is another. Why? Because in many states, your annual report filing deadline is based on your incorporation, formation, or foreign qualification date.
These states use that “anniversary date” as the starting point and then set a window during which the annual report is due. For example, one state might require you to file at some point during the three-month period beginning with the first day of the entity’s anniversary month. A neighboring state may require filing during the anniversary month itself. Miss the window, and the state will penalize your business.
If you have an LLC or corporation that does business in only one state, annual report compliance is manageable. But when multiple states are involved, it gets confusing in a hurry.
Consider this fictional example of an LLC operating in multiple states. The owners formed Smoke & Sear LLC in State A in July, and business (not to mention the food) was good. The following year, the company registered to do business in State B and expanded into State C. In addition to overseeing three restaurants, the owners 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 foreign LLCs to file during the first quarter of the calendar year (in January, February, or March).
- State C requires a biennial report filing on April 1 only in even-numbered years.
Tracking deadlines and requirements across multiple states is challenging, and you can’t count on the state to alert you ahead of time. Not all states send out reminders of upcoming filing deadlines.
The case for using an annual report service
Annual report filings can be time-consuming, especially when you're juggling the day-to-day demands of running a business. If you operate in more than one state, the challenge multiplies. Each state has its own deadlines, forms, fees, and information requirements, and missing any one of them can result in penalties or loss of good standing.
A managed annual report service can take this burden off your plate. Instead of tracking dozens of deadlines and rules across multiple jurisdictions, you can rely on a service to monitor and manage the process on your behalf. The benefits typically include:
- Accurate, timely filings. A service tracks each state's deadlines and submits your reports on time, helping you avoid late fees and penalties for inaccurate or incomplete information.
- Multi-state compliance made simple. Whether you operate in two states or twenty, a service handles the varying requirements so you don't have to learn each one yourself.
- Help with company updates. When your company information changes, such as a new address, registered agent, or officer, certain services will update the state's records accordingly. This is a feature worth confirming when choosing a provider.
- More time for your business. Handing off compliance tasks gives you more time to focus on running and growing your company.
For business owners with limited time or operations spanning multiple states, a professional annual report service offers peace of mind and a reliable way to stay compliant year after year.
Conclusion
If you don't plan to expand 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. However, it may not be the best use of your time and energy when you're already juggling the countless to-dos required to grow your business.
Learn more
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.