What Is an Annual Report and Why Is It Important?
Some states call it an Annual Report. Other states refer to it as an Annual Registration or Statement of Information. At the end of the day, they are all essentially the same thing.
An Annual Report, or whatever your state wants to call it, is information that business entities (Limited Liability Companies, Corporations, Non-Profits, and Partnerships) need to file with their state regularly. State Governments require these reports be filed so that the public can easily locate information regarding companies that are operating within the state. Failure to complete this reporting task results in all sorts of difficulties for the business entity. The most notable of these is that of being lumped into the dreaded status of “bad standing”.
While a status of “bad standing” may not seem that threatening, it does have some significant consequences for the entity. Aside from the state imposing costly penalties, failure to turn in annual reporting can greatly hinder an entity’s ability to conduct normal business. For example, being in “bad standing” means a company is ineligible for most financing through banks or credit unions. It can also result in a disqualification from bidding processes or government work. This is why our Certificate of Good Standing service is so popular. After a period of non-compliance, an administrative dissolution will take place that results in the business losing all the benefits of its LLC or corporation status.
There are myths out there that simply having a business license in a state or filing a tax return exclude an entity from needing to do their annual reporting. This is false. The annual report must be turned in, on time, every year regardless if the business has a state license or is regularly submitting its tax returns.
Now, here is where I would like to simply insert a single date into the body of this blog and indicate to readers this is when their annual reports are due. But, of course, it is simply more complicated than that. You see, every state has their own deadlines and processes. Depending on where you do business or if you are doing business in multiple states, things could get complicated quickly.
For example, in Colorado, the Annual Report is due within a three-month window in which your entity was formed. In California, the report is due by the last day of the month your company was formed. In Florida, Annual Reports are due by May 1st, every year, regardless of the month the entity was formed.
Some states want the Annual Report information sent to them electronically. Some still prefer paper. Some states just want corrections made on the entity’s existing report while other states want the business owner to start from scratch by filling out a blank form every year. There is almost always a fee charged when you file the report, but again, that fee differs from state to state and may depend on your business’s entity type.
If the last few month has taught business owners anything, it is to expect the unexpected.
Filing an Annual Report is, simply put, busy work. However, it is important and necessary busy work. If the last few month has taught business owners anything, it is to expect the unexpected. Businesses that did not have their Operating Agreements, Annual Reports, and financials up to date found themselves ineligible to apply for the CARES Act Payment Protection Program or any of the other SBA Disaster Loan Programs. Read “ Applying for SBA Disaster Loans? Make Sure Your Operating Agreement Is Up to Date.“
It is vitally important to take the administrative functions of being a business owner seriously and make sure your administrative paperwork, bookkeeping and reporting with the state is always up to date. This also includes staying up to date on all the necessary filings, rule changes and requirements of the individual states you do business in. Furthermore, you want to keep a comprehensive, complete and accurate file of your company’s activities, otherwise you could potentially lose your liability protection if faced with an aggressive plaintiff. Read about our Corporate Paperwork Package.
When I do business formations for clients, I always like to stress the importance of administrative reporting and suggest that a single person within the organization be assigned the task of ensuring the Annual Reporting gets done (gathering, updating, submitting, paying the filing fees, etc.) However, timely completion of the reporting is sometimes still a struggle for businesses as it is a task that is easy to forget or even easier to put off in lieu of taking care of more pressing work. As such, it may make more sense to utilize an Annual Reporting service, where a third party handles the reporting aspect with the states for a nominal fee. An Annual Reporting Service will make sure your reports or filed, on time, are kept up to date.
The Annual Report needs to be front and center of any business owner’s to do list and though the concept of it is relatively simple, the consequences of failing to do it and be costly or even fatal to a business.
Would you like an expert to handle your annual reporting? We are Happy to Help.
For $99 (plus state fees), L4SB will submit the Annual Report for you — and take the pressure off:
- You can relax knowing your Annual Report will be submitted correctly and on time. Your business entity will remain active and in good standing with the state.
- We value your privacy, and always list the least public information necessary when we file on your behalf.
- Our paralegals will be in touch with any questions, to make sure your filing is handled professionally.
Let our experienced Business Lawyers and Paralegals handle the Annual Reports process so you can focus on your business.
Contact Law 4 Small Business today. Our team of experienced attorneys will be here to help.