Business drives the global economy and owning a business can have a huge impact on your own personal economy. We’re writing a series of articles about the nuts and bolts, best practices, and legal necessities around organizing your business. This week, it’s all about the annual/biennial report.
For the sake of clarity, we’re writing about the state-required reports, not the Federal SEC required annual reports for publicly traded companies. The state-required report is also different from an annual financial report that you might create for stakeholders and marketing purposes.
For private corporations, LLCs, and non-profits, the annual or biennial report is vitally important.
The state says that if you don’t file one telling the state you are still in business, your entity doesn’t exist. So, if you don’t file this report, all the hard work you put into becoming a legal entity—not to mention operating, making a profit, and delighting your clients—will be stopped short.
Here in Iowa, where our business is located, it is a biennial process. If you’re not sure what your state’s requirements are, this is an excellent resource that gives you a sense of what the annual/biennial reporting requirements are in your state. The list includes all 50 states and a basic understanding of requirements for corporations, LLCs, and non-profits.
What’s in These Reports?
Annual/biennial reports vary in complexity from state to state, but the kinds of information collected in these reports generally include:
- The principal business address
- The names and addresses of the management of business (directors and officers for corporations, members/managers for LLCs, general partners for LPs and LLPs)
- The name of the registered agent and address of the registered office
- In some cases, the number of shares of stock a corporation has issued is also required.
- Important identification numbers for your business.
- The purpose of your business.
Why Do You Have to Do This?
All states require some sort of reporting for business entities. Not all require it for LLCs or non-profits, but S-Corps and C-Corps need to file annually or every other year in every state.
The main reason is the state wants to have a clear idea of how much tax revenue they can expect. States also want to maintain an updated database of public information about businesses that operate in their jurisdiction. The state wants its tax revenue and wants to know any major changes in ownership and location for your business. That’s the reason for these reports.
The good news is that more and more states are creating online platforms to make it easier—and in theory quicker—to file. It’s the government, so quick and easy are relative terms!
What if I Don’t File?
The consequences of not filing an annual or biennial report can be severe. They range from late fees, penalties, and taxes, to the involuntary dissolution of your company. Not all states take that draconian an approach, but do your research and don’t take any chances.
There is a lot to juggle with business ownership, and knowing what is required will help you keep the business running smoothly and paying more attention to the things that matter most to you.