The State Annual Report Filing Requirement WH ITE PAPER

Transcription

1 The State Annual Report Filing Requirement WH ITE PAPER

2 CT Representation Services THE STATE ANNUAL REPORT FILING REQUIREMENT Nearly every business entity is subject to a state Annual Report filing requirement. Failing to file can lead to penalties, ranging from fines to administrative dissolution. Therefore, it is important for business owners, their entity compliance officers and corporate counsel to be familiar with the myriad issues surrounding this state compliance obligation. INTRODUCTION Statutory business entities, such as business corporations, nonprofit corporations, limited liability companies (LLCs), limited partnerships (LPs) and limited liability partnerships (LLPs), generally are required to file an information report with the business entity filing office of their formation state. They must also file reports in every foreign state in which they are qualified to do business. This is typically referred to as an Annual Report requirement because, in most cases, the information report must be filed every year and the document filed is called an Annual Report. However, there are a few states where the filing is not due annually. For example, New York, Alaska, Indiana and Iowa are among a handful of states requiring corporations and LLCs to file biennially. Furthermore, the form may be called something other than an Annual Report. In California, for example, a Statement of Information is filed. Nevada requires corporations to file an Annual List of Officers, Directors and Registered Agent. Page 2

3 Frequency of filing and the name of the document filed are not the only details in which state requirements vary. They also differ on issues such as exemptions, fees, due dates, contents and penalties for failing to file. However, a number of generalizations can be made. This White Paper will take a general look at the Annual Report filing obligation, in order to help those responsible for compliance better understand this important state requirement. CONTENTS OF AN ENTITY S ANNUAL REPORT The information required to be set forth in an Annual Report differs from state to state. It can also differ within a state from business entity type to business entity type. THE MAIN FUNCTION IS TO PROVIDE STATE RESIDENTS, INVESTORS AND GOVERNMENT AGENCIES WITH THE INFORMATION NECESSARY TO LOCATE AND COMMUNICATE WITH DOMESTIC AND FOREIGN BUSINESS ENTITIES. The business entity statutes prescribe the minimum required content. The filing office may be authorized to require additional information that will aid in the filing process. The required content is often related to the Annual Report requirement s function. The main function is to provide state residents, investors and government agencies with the information necessary to locate and communicate with domestic and foreign business entities. Consequently, an Annual Report generally must set forth: The business entity s legal name In the case of a foreign business entity, the fictitious name it qualified under, if any The principal office address in the state, if any The principal office address wherever located The registered agent s name The registered office address The names and business addresses of directors and officers (for a corporation), managers and members (for an LLC) or partners (for an LP or LLP) Page 3

4 Some states use the Annual Report to collect information for calculating the business entity s franchise tax. In Delaware, for example, the corporate annual filing serves that purpose. Consequently, a Delaware corporation must set forth the number of authorized shares and par value as well as such additional information, schedules and attachments as the Secretary shall require to ascertain the franchise tax due to the State (Title 8, Sec. 502, Del. Code). Practice Pointer: A franchise tax is a tax imposed on the privilege of carrying on a business in the form of a corporation, LLC, LP, etc. The franchise tax is often measured by the business income, but may be based upon other criteria, such as a corporation s authorized shares. ANNUAL REPORT FILING REQUIREMENTS When filing Annual Reports, consider the following issues: SOME STATES USE THE ANNUAL REPORT TO COLLECT INFORMATION FOR CALCULATING THE BUSINESS ENTITY S FRANCHISE TAX. Due Date: Some Annual Reports are due on a fixed date, although this date can vary by entity type. For example, Delaware s LLCs, LPs and LLPs must file by June 1, whereas Delaware s corporations must file by March 1. Other states have a due date based on the business entity s anniversary of formation or qualification. Practice Pointer: In recent years, several states have switched to an anniversary-based due date. Receiving Annual Reports throughout the year reduces the administrative burden on the filing office and provides a steady stream of revenue. However, this puts an increased burden on attorneys and compliance officers that must track multiple entities in multiple states. One must be vigilant in tracking varying due dates based upon formation or qualification. Forms: Some states prepare forms for each business entity, preprinted with the most current information on file. Others provide blank forms that must be filled out. Page 4

5 Method of Delivery: In many states, the Annual Report may be delivered to the filing office in paper form or electronically. However, there are still some states where paper is the only option. In contrast, a growing number of states will only accept Annual Reports that are filed electronically. Delaware, for example, requires electronic filing and will reject paper filings. Extensions: Some states will grant filing extensions. However, good cause may have to be established first. Fees: Nearly all states require a filing fee to accompany the Annual Report. The fee may be a flat rate or it may be variable. A variable rate may be based on a corporation s authorized shares, the number of an LLC s members or an LP or LLP s partners, or some other basis. Some states will charge nonprofit corporations no fee or a reduced fee. PENALTIES FOR FAILURE TO FILE IN ADDITION TO MONETARY PENALTIES, CONTINUED NON- COMPLIANCE CAN RESULT IN THE DELINQUENT BUSINESS ENTITY FALLING OUT OF GOOD STANDING. Penalties are imposed for a failure to comply with the Annual Report requirement. If the report is not filed by the due date, a late fee will be charged. In addition to monetary penalties, continued non-compliance can result in the delinquent business entity falling out of good standing. This means the state will not issue a certificate of good standing or file documents for the business entity. If the business entity still does not file its report, the following can result: Administrative dissolution ( resources/white-papers/wp-administrative-dissolution?sid=127909) Administrative revocation of the authority to do business in foreign states Loss of the exclusive rights to a name Loss of access to state courts Personal liability for individuals doing business on the entity s behalf Page 5

6 Practice Pointer: Generally, before a state will administratively dissolve or revoke a business entity, it will notify the entity of the delinquency and provide a limited period of time to file the report and pay the fees and penalties. However, if administrative dissolution or revocation occurs, reinstatement of an entity s good standing may be required. CONCLUSION State corporation, LLC, LP and LLP laws generally require domestic and foreign business entities to file a report in most cases annually providing information about the entity. Filing this report is a prerequisite to maintaining good standing. Because of the serious negative consequences of a failure to file, the individuals responsible for compliance for each business entity should take all steps necessary to ensure that these reports are filed in a timely and complete manner. CONTACT US Registered Agent Corporate Filings Licensing and Bonds 111 Eighth Avenue New York, NY This White Paper, brought to you by our staff of Compliance and Governance experts, was produced March, This document is for general information purposes and is not intended to be and should not be taken as legal advice. Page 6