All states impose various reporting obligations on domestic and foreign business entities operating in their states.
Failure to comply with these reporting requirements can result in fines and loss of good standing with the state.
One such requirement is the annual report.
Filing annual reports isn’t a complicated process as many new business owners may assume. However, lack of the right information can turn the process into a headache.
This article covers all you need to know about annual reports, including their purpose, who is required to file it, and how to file the annual report.
What is an Annual Report
In the era of remote work, an annual report has become increasingly important for businesses. It’s business activities, and how to contact the people in charge.
The details required when filing an annual report may vary between states. Generally, businesses are required to provide basic administrative and legal information, such as:
- Company’s legal name
- Purpose of the business
- Principal office address
- Name and address of Registered Agent
- Names and addresses of directors, officers, managers, members, or partners
Who is Required to File an Annual Report
It’s mandatory for statutory business structures to file annual reports through their respective state departments. This includes:
- Limited Liability Companies
- Limited Partnerships
- Limited Liability Partnerships
Note that the requirements for filing an annual report varies between states. For instance:
- If you start an LLC in Texas, you don’t need to file an annual report. However, you’re required to file an annual franchise tax even when no tax is due.
- For businesses operating in Indiana, annual reports are filed biennially, not annually
- Some states like Delaware are less strict with the annual reporting requirements for non-profit corporations.
Why is it Necessary to File an Annual Report
Annual reports inform the state government of the business’s continued existence. It also helps the Secretary of State maintain up-to-date records of the business.
Filing the annual report keeps you compliant with the laws and regulations of the state. It keeps the business in legal standing with the state government.
Failure to file the annual report can result in hefty fines. Other negative impacts non-compliance can have on your business include:
- Termination of the entity’s registration as a result of continued non-compliance
- Loss of good standing that affects your ability to conduct business within the state
- Loss of limited liability protection
- Difficulty getting into contract with creditors, partners, suppliers, and investors due to the history of non-compliance
Keeping track of compliance requirements when you still have an entity to run isn’t easy.
The best approach you can take is to register your Corporation with a business formation expert like GovDocFiling in Texas and other locations.
The business formation package comes with annual compliance notifications that help you focus on other strategic aspects of your business and still remain compliant.
How to File Annual Reports
The steps you need to take to file an annual report depends on the State your entity is incorporated. Each state has different reporting requirements.
In most instances, you’ll need to fill a form with the entity’s details. The form may be available for download from the Secretary of State website. Some states may also mail it to your registered agent.
There are some things you need to give attention to:
- Due dates: Check your state’s requirements with regards to filing dates. Pay particular attention to the initial annual report’s due date following registration
- Filing fees: Except for states like Idaho, filing an annual report comes at a fee. Check the filing fee for the specific method you’ll be using to file and the type of entity. Some states charge differently for mail-in versus online applications
- Accuracy of information: If there are any changes to your contact information, address, or other details, fill in these new details in the form. Ensure the person who signs the form is authorized to sign
What happens when you make a mistake when filing your annual report? Most states give you the option to file an amended report. You may be required to pay an extra fee associated with amending the annual report.
It’s good practice, maintain all correspondence and documentation related to the correction, such as acknowledgement by the state agency of the submission.
Annual Reports for Shareholders vs. State-Required Annual Reports
It’s important not to confuse between a state-required annual report and the annual report for shareholders.
Corporations that file the annual report with their Secretary of State still need to create a separate annual report for shareholders.
An annual report for shareholders is a comprehensive report containing details of the financial condition and operations of a corporation over the preceding fiscal year.
- General information about the corporation, such as names of corporate officers and directors and registered address of the company
- Graphics, photos, and a narrative of the company’s operations
- Performance highlights for the preceding year
- Financial statements such as balance sheet, cash flow, and income statements
- Notes to the financial statements
- Auditor’s report
- Management Discussion and Analysis (MD&A)
- Goals for the coming years
An annual report for shareholders promotes transparency and accountability among Corporations.
It provides shareholders with an overview of the Corporation’s overall financial stability and strategic outlook to help them make informed investment decisions.
Wrap Up: Keep Your Business Compliant
You cannot afford to ignore or skip filing state-required annual reports. It could have significant effects on your entity’s legal standing, its reputation, and ability to conduct business.
By adhering to the specific requirements of your state, you can stay on the right side of the law and continue to thrive.