You Forgot To File Your Annual Report … Now What?
So you didn’t file your business’s annual report by the state’s deadline, and you’re wondering what to do next. Since you’re probably already aware that failing to file an annual report can have significant administrative and financial consequences for your business, I’m not going to waste time preaching about the virtues of timely reporting. You didn’t get your annual report filed on time, and that’s that. Now it’s time to act fast to preserve your business.
What Is an Annual Report?
Most states require businesses to submit an annual report (though the report isn’t always “annual”) to keep the state’s records current. This typically means submitting a form to the secretary of state’s office that updates or confirms your business name, registered agent information, business address, and other little details that usually already appear on your business’s formation documents.
If something has changed (for example, your business is a corporation that elected a new director), your annual report will reflect that change, and you might find yourself in the position of needing to pay additional fees and submit separate forms to amend your business’s other official state documents. If nothing has changed, you’ll still need to submit your annual report to confirm the accuracy of the state’s current records. Some states require true “annual” reports while others require reports every other year or every few years, and the filing fees vary widely from state to state.
What Happens If You Don’t File?
Businesses that neglect to file annual reports face slightly different consequences in different states, and the states usually follow different timelines, but the basic idea is the same:
Late Penalties
Usually a state will smack your business with a late penalty, as a kind of warning shot, to get you to file your annual report as soon as possible, and you’ll usually have a second deadline before the state takes any further action against your business. If you’re at this stage, good for you. Pay the late penalty and submit your annual report right away.
Administrative Dissolution
Continuing to wait will usually result in a loss of good standing and the state will administratively dissolve your business. “Good standing” is basically the state’s check-mark saying that your business is compliant with state regulations, so a loss of good standing can result in a struggle to get financing, difficulty establishing contracts with other companies and services, and the inability to expand your operation into other states (which often require a certificate of good standing to register as an out-of-state business).Once the state has officially dissolved your business, you can’t operate in the state at all, at least until you get your business reinstated.
Loss of Liability Protections
If your business is an LLC or corporation, moreover, you and your associates may lose the very liability shields that motivated you to choose those business structures. You’ll find yourself vulnerable to lawsuits and creditors before you know it.
What Should You Do?
If the state has already dissolved your business, you’ll usually need to submit a reinstatement form to the Office of the Secretary of State or a comparable state agency, submit your missing annual report, and pay any outstanding fees owed to the state. You’ll also need to make sure your business’s name is still available. If some vulture snapped up your business’s name in the time it took for you to request your reinstatement, which happens all the time, you may even need to change your business name and pay an additional state fee to amend your business’s formation documents.
Why All the Fuss?
Honestly, the practice of filing annual reports is probably just a relic from a time when it was much harder for states to store, update, and distribute information, and so the modern practice of requiring businesses to file annual reports, even when your information hasn’t changed at all, is beginning to look like one more way to generate revenue for top-heavy, cash-strapped government offices. Maybe that’s why so many businesses neglect to submit their annual reports by their deadlines. It’s just hard to see something as important and pressing when it’s such an obvious waste of time.
That said, the states’ requirements aren’t changing any time soon, and successful people know how to pick their battles. If you haven’t done so already, I’d recommend just hiring a commercial registered agent service, not an individual, to help you juggle your deadlines and ensure your organization submits its annual reports and other paperwork correctly and on time. Pay out a little money to a professional service, in other words, so you can get back to the business of making money.