As a business owner, you are likely familiar with the various regulations and requirements that you must meet to continue running a successful business. Alongside things like licenses and taxation, one of the most important things you can do is file your annual report. These reports ensure that your company has all the proper information on file with the state and is operating in good standing.
In addition to the benefits of these reports, they are often required by the Secretary of State and other government entities. These reports help to ensure that each company is meeting its taxation, licensing, and other regulatory requirements and keeps them accountable. While these are critical business filings, they don’t have to be overly complicated – keep reading to understand what these reports are and how you can ensure they’re completed correctly.
What is an annual report?
An annual report provides information about the business’s status, location, and operations throughout the year to the public, investors, the filing office, and any other relevant government agencies.
Mainly, the report serves as a means for the state government to collect vital information about each business entity operating within its jurisdiction. It ensures that the state has up-to-date and accurate details on the business’s status, location, leadership, and other essential aspects.
The primary purpose of this report is to maintain transparency and accountability among businesses, enabling the state to monitor compliance with regulatory requirements and ensure that companies are operating in good standing.
Does every business file an annual report?
The majority of business entities will need to file an annual report as a part of maintaining a business in their formation state, as well as other states where they are qualified to operate a business.
Are the reports always filed annually?
While these are called annual reports, a handful of states only require them to be filed every other year, and others may use a different term like a “Statement of Information” or a “Periodic Report” for the same concept.
What to include in an annual report
While the specific filing requirements for state-mandated annual reports may vary from state to state, there are common components that most reports typically include:
- Business information: The annual report begins with basic details about the company, such as its legal name, any fictitious names (DBAs), and its principal office address. This information helps the state keep track of the business’s identity and location.
- Registered agent information: The report usually includes the name and address of the registered agent. The registered agent is the individual or entity designated to receive official correspondence and legal documents on behalf of the business.
- Director/Officer information: For incorporations, the report may require information about the directors and officers, including their names and business addresses. In the case of LLCs or partnerships, it may include the names and addresses of members or partners.
- Business activities: The report may ask for a brief description of the business’s activities during the reporting period. This helps the state understand the nature of the company’s operations.
- Financial statements (Varies by State): Some states require businesses to include financial statements as part of their annual reports. These statements typically consist of a balance sheet, income statement, and cash flow statement, providing insights into the company’s financial health.
- Additional information (Varies by State): Depending on the state’s annual report requirements, businesses may have the option to include supplementary information in their annual reports. This could include details about the business’s performance, outlook, or messages from company executives.
In addition to this basic information, many companies use the opportunity to include other information like financial statements, performance outlooks, or messages from executives. These often turn the annual report from a simple government form into an important artifact that can be used to make statements about the company to interested parties, even when this is not required by the state.
How to file an annual report
The exact process for filing an annual report will vary widely by state, from how it must be submitted to the cost. You will need to check your individual Secretary of State’s office to be sure that you don’t miss any specific state requirements that apply to your LLC or other business.
In some states, the forms are pre-created and mailed to the company with information on file and just need to be signed and resubmitted. In other cases, you will need to find and complete the forms yourself. While there is always a mailing address available, the majority of states now offer online filing of annual reports.
There is typically a fee associated with the annual report, either in the form of a flat fee or one that varies by business structure and other factors.
Who files an annual report?
Nearly all businesses will need to file an annual report in all states, though the laws may vary slightly in different states.
Sole proprietorships and general partnerships are the biggest exceptions to this rule, as they rarely need to file annual reports. However, all of these statutory business entities will likely need to file an annual report:
- Corporations (C, S, and B corps)
- Non-profit corporations of all forms
- Limited liability companies (LLCs)
- Professional corporations (PCs)
- Limited liability companies (PLLCs)
- Limited partnerships (LPs)
- Limited liability partnerships (LLPs)
It is very rare for these businesses not to need an annual report.
For small businesses, the owner or an employee will be able to easily complete the annual reports. Very large organizations may use a lawyer or outside annual report service to properly complete the forms.
A business will need to file annual reports in any state where they are operating or doing business. Because each state has its own requirements, this may mean you need to keep track of when each report is due, what it should include, and how to submit it in order not to miss any filing deadlines.
Other annual reports
When companies have 500 or more shareholders or over $10 million in assets or are publicly traded, they will also be required to file additional annual reports through the U.S. Securities and Exchange Commission. These reports are much more in-depth as a way of ensuring accountability to shareholders and the public and are due alongside typical annual reports – they are known as Form 10-K
This type of annual report is much more comprehensive, often including not only information but also graphics, photos, and data to support a narrative that chronicles the company’s activity over the past year. Typical sections may include:
- General corporate overview
- Highlights of finances and operations from the past year
- A letter to the shareholders from the CEO
- Accompanying text, graphics, and photos
- Management discussion and analysis (MD&A)
- Financial statements (such as balance sheet, income statement, and cash flow statement)
- Notes on the financial statements
- Auditor’s report
- Summary of financial data
- Overview of accounting policies
It is required that Form 10-Ks are distributed to shareholders when they hold annual meetings to elect directors. They must also post them on company websites and may be used by outside parties like investors. Annual reports illuminate things like a company’s ability to pay its debts, whether it made a profit, growth over the years, how much profit is retained, and the proportion of operating expenses to revenue.
When needed, an annual report can also determine whether the company is conforming to generally accepted accounting principles (GAAP) to demonstrate financial conformity to the interested parties.
When is an annual report due?
Each state is able to determine when they require annual reports to be filed. As the name implies, this is most often once per year, though some states do offer biennial versions of the reports or do not require them in the first year of business.
Some states have a fixed calendar date when all businesses must have completed the report filing or a cadence like the first quarter of the calendar year or the last day of the fiscal year.
For many businesses, it’s also important to take into consideration that they may operate in different states with different due dates. If your business is formally established in multiple states, you will need to appropriately file an annual report in each location based on their individual laws. While it is rare, at least one state has a limit on how early you can file the report. In New York, the biennial statement cannot be filed before the calendar month in which it is due.
There is no universal requirement for you to receive notice of your annual report being due soon. Many states do provide this, either through communication like mail or email or by simply sending you the forms that need to be completed. You can find out if your state offers this option, but it is not automatic everywhere. Instead, you should always discover when your reports are due and add recurring calendar invitations for the coming years to ensure you don’t miss the date.
What happens if you don’t file an annual report?
When the annual report requirement is not appropriately met, states can impose a range of penalties based on their own laws. These are typically in the form of fines and late fees until the report is adequately filed.
If you continue to miss deadlines and not provide an annual report, it will be seen as continued and willful non-compliance. Eventually, a company would be considered delinquent, and the company would no longer be in good standing. This means the state will no longer issue a certificate of good standing or file documents on behalf of the company.
A period of non-compliance that lasts long enough can lead to the dissolution of a domestic company and an administrative revocation of the ability to do business as a foreign LLC or company. This ultimately means a business will no longer be able to operate as its intended structure. For example, in Florida, annual reports are due on May 1st, but if they are not received by the 3rd Friday of September, the business will be dissolved or revoked on the next Friday.
It is important to know that even if you stop doing business in a state, they will expect an annual report until you properly withdraw from the state.
In addition to their penalties, annual reports may be required for a variety of other business activities. Financing from lenders and investors, contract bids, and other opportunities will often depend on being able to demonstrate that the company is in good standing. If this can’t be demonstrated, the business may lose its financial stability.
Most formal business entities will need to file an annual report. This includes all corporations, LLCs, and LLPs or LPs. Sole proprietorships and general partnerships generally are not required to file an annual report. Some states have slightly different rules, so always check with your Secretary of State or Department of State.
Each state will have an annual report form that will dictate the information required. Usually, it includes things like the business name and location, basic financial information, contact information for business owners and officers, and registered agent details. Some businesses may choose to include information on business performance and use the annual report for other purposes as well.
States dictate their own annual report due dates, so you will need to check your state’s laws on this. Most often, it will be due on or near the anniversary date of business formation, but it may also be a fixed date or time of year. In some cases, you may not be able to submit before certain time periods.
There is typically a filing fee associated with your annual report. The cost varies by state, with the lowest being $0 and the highest being $820 in California. These may also change based on the type of business entity type and other factors. You can typically pay by check or credit card.
If your annual report is not submitted by the stated deadline, most states will impose late fees until it has been paid. There is generally a period of time when you can be late before any other penalties are handed out.
Failing to file an annual report is considered non-compliance with state law and can have serious consequences. If it is not filed, the business will no longer be considered in good standing, which can jeopardize many funding and licensing requirements. Eventually, the business can be dissolved, and all rights to operate revoked.
Yes – while annual reports and taxes may be used for similar purposes, they are two separate processes that are run by separate state agencies. You will need to file both your annual taxes and an annual report according to the rules of each.
In the majority of states, these annual reports are considered public records. Members of the public can access these reports through the state website for business registration, with varying details displayed as a part of the search. Some sensitive information can be redacted, but most of the basic information is considered public.
If your business is registered to operate in a state, you will need to file an annual report in that state, regardless of how many there are. This means adhering to each state’s due dates, filing instructions, and paying their annual report fee.
While most states require an annual report to be an annual filing, a handful of states only need the information every other year. In these cases, it is called a biennial report to reflect this cadence. The report is typically the same as an annual report, just submitted less frequently.
In some states, an annual report is called something different. These names include yearly reports, statutory reports, statement of information, or a summary annual report.
State mandated annual reports serve a number of purposes. They help the state keep track of businesses operating within its borders, and they can be used to collect data about the state’s economy. Annual reports can also be used to verify the business’s good standing, which is important for businesses that need to obtain certain licenses or permits.
If you don’t know the information required for your annual report, you can usually contact your state’s Secretary of State’s office for help. They will be able to provide you with a list of the required information and instructions on how to file your annual report.