Starting and running a business takes a lot of effort. Whether it’s managing the day-to-day operations or dealing with an emergency, small business owners tend to have their hands full. But if your business is one of the millions that require an Annual Report, then you must make sure that you fulfill that requirement; otherwise, all that hard work of forming a business may go down the drain.
If you need a bit of assistance in this area (or, perhaps, in keeping your filing deadlines straight), you’ve come to the right place. Let’s dive into what an Annual Report is and how you can easily file yours.
What Is an Annual Report?
As its name implies, an Annual Report is a document that incorporated companies file each year that provides a summary of their activities to governing authorities, typically at the state level. The goal here is to ensure that the state is kept updated on any changes within your organization, such as your business operations, ownership and financial performance over the year. You'll need to include the company name and address and the names and addresses of the owner(s), partner(s), member(s), Registered Agent and other people of interest, such as the board of directors.
You may, in fact, be the one whose personal information is on record in the Annual Report as the Registered Agent. However, we don't advise acting as your own Registered Agent and highly recommend hiring a specialized Registered Agent service provider. The Registered Agent plays an important role in receiving and notifying you of all important documents that come in from the state and must be available during the business day. That means being in a physical address from 9-5 and not offsite attending to customers or at a meeting or conference. For most business owners, running a company and acting as its Registered Agent are incompatible roles.
How to File an Annual Report
The first step to take is to determine if you need to file an Annual Report for your business. Business entities, including Limited Liability Companies (LLCs), C Corps and nonprofits, are required to file a report with their state and the foreign states where they conduct business. Luckily, most states provide the option to file an Annual Report online on your Secretary of State’s website. Filing a report includes a fee, which can vary from $40 to $500. (Sole proprietorships and partnerships are usually not required to file an Annual Report, as they do not enjoy the benefits of incorporated companies.)
It is important to check with your state to confirm the exact details of what's required with the Annual Report. Your state’s website will have a list of the required information necessary to file your Annual Report. For the most part, filling an Annual Report can be done online but some states may require or give the option to mail in your Annual Report.
Who Prepares an Annual Report?
Filing an Annual Report is a job that should be assigned to a manager or other responsible employee, preferably with experience in accounting, but many small business owners tend to take this task on themselves. Others may outsource the job to a professional service or accounting firm. Sometimes, it may be a combination of both self-preparing and farming out the work. It all depends on how you like to run this task, your comfort level and where you think you’ll require the support.
What’s in an Annual Report?
The purpose of an Annual Report is to provide a clear picture of how your small business is doing for the year. In addition to filing with your Secretary of State, the report also informs your shareholders how the company is doing and what the outlook is for the next year.
Most Annual Report filings will include the following information:
Company name and address
The type of business that you are running, including a mission statement
A letter to the shareholders or executive summary outlining key events or milestones met by the company; any significant changes to market strategy, services or product lines; anticipated expansion plans for the future and even perceived threats to the business
Many business owners will include photos, charts and graphs, and even general interest stories related to the business and company news. This will help keep investors and shareholders more engaged and vested in your business as well as your plans and vision of the company moving forward.
Keeping Track of Filing Time
So we’ve covered the basics of what an Annual Report is and what they generally include. But how do you go about confidently filing one with your state and ensuring the continued legal compliance of your company? Let’s dig into it.
The required filing deadline for your Annual Report varies from state to state, though it tends to be either the date on which the company was formed or a pre-determined date applying to all organizations.
Despite the name, Annual Reports aren’t actually required every year in all states. In some states, a report only needs to be filed every two years and is referred to as a Biennial Report. Similarly, Annual Reports are sometimes known as “Statements of Information,” and certain companies may need to file supporting documentation in tandem with their report.
Make sure to set up reminders regarding your Annual Report filings. Considering how busy the average day is for a business owner, it is easy to postpone or even overlook the necessary tasks in completing a report and submitting it on time. Non-compliance and failure to meet this annual reporting obligation can result in state-imposed fees and penalties. If you do not meet the due date of the filing, you’ll also be charged a late fee.
Since every state has different rules, the process can be understandably unnerving for business owners determined to get everything in order before finalizing their report. Luckily, Incfile has extensive experience facilitating incorporation and related services for companies just like yours. Our team is ready to assist you in understanding your exact filing requirements and getting every bit of data collected and submitted on schedule. By entrusting this task to Incfile, we’ll save you the hassle of having to comb through all your records and assemble them to match your state’s precise requirements.
We’ll handle the entire process to ensure that you meet all the legal requirements and get your Annual Report filed so that you can spend time focusing on growing your business and keeping your customers happy.
Peter Mavrikis is an author and editor with over 25 years of experience in publishing. He has worked as the Editorial Director for Barron’s Educational Series, as well as Kaplan Test Prep, where he ran the test prep, foreign language, and study guide divisions. Peter has also written several books on history, exploration, science, and technology.