Updated June 2022
An annual report shows states your business is in good standing
Making the leap from employee to business owner requires more than just finding the courage to overcome the risks and fears that come with entrepreneurship. It also requires a ton of hard work and responsibility. Behind the scenes, small business owners spend countless hours in the back office checking off tasks like balancing the books and paying business tax.
In fact, small business owners spend nearly 15 hours a week managing their business finances!
While most business owners know that satisfying state and federal tax obligations is part of the job, many people are unfamiliar with the process of filing an annual report, which shows states that your business is credible and in good standing. Before they know it, they’re hit with a tax penalty for missing their due date. But what is an annual report? What happens if you miss the filing deadline? And most importantly, when is your annual report due? Let’s take a closer look at the purpose of annual reports and whether or not your business needs to file this form.
What is an annual report?
Most people are familiar with the annual reports filed by big public companies to the Securities Exchange Commission and shared with shareholders. But if you’re a small business owner, and are incorporated as an LLC, S-Corp, or C-Corp, you also may be required to file an annual report, albeit on a much smaller scale.
An annual report is a form that a business entity is required to submit to its respective state to detail a company’s activities and prove its good standing. The annual report provides basic information about the company, its business structure, and its leadership. It also informs the state of any major “business moves,” such as a new owner or location.
This form outlines basic information about your business, including your:
- Business name and address
- State of incorporation
- Registered agent information
- List of officers and directors or list of members of an LLC
- Details of business activities in the state
It can also include a financial breakdown, such as balance sheet summaries, a cash flow statement, capital investment data, an auditor's report, anticipated revenues and expenses, changes in equity report, income statement, and other profit and loss details. In some states, more information may be required.
Typically, an annual report provides financial information about the company, its structure, and its leadership.
Which states require annual reports?
Requirements for annual reports can vary greatly from state to state. Ohio is the only state that does not require an annual report filing for any business type. Currently, 45 states and Washington D.C. require corporations and/or LLCs to file:
Alabama | Alaska | Arkansas | California | Colorado | |||||
Connecticut | Delaware | Florida | Georgia | Hawaii | |||||
Idaho | Illinois | Indiana | Iowa | Kansas | |||||
Kentucky | Louisiana | Maine | Maryland | Massachusetts | |||||
Michigan | Minnesota | Mississippi | Montana | Nebraska | |||||
Nevada | New Hampshire | New Jersey | New York | North Carolina | |||||
North Dakota | Oregon | Pennsylvania | Rhode Island | South Dakota | |||||
Tennessee | Texas | Utah | Vermont | Virginia | |||||
Washington | West Virginia | Wisconsin | Wyoming | Washington D.C. |
Arizona, Missouri, and New Mexico all require corporations to file an annual report but do not require LLCs to file. Conversely, corporations in Oklahoma are not required to file, while LLCs are.
The Secretary of State in South Carolina does not require an annual report. However, corporations are required to file a yearly state income tax return (SC1120 or SC1120s). These returns have an annual report included. LLCs that choose to be treated as a C or S Corp will also need to file either the SC1120 or SC1120S. LLCs treated as partnerships or sole proprietors are not required to file an annual report.
Penalties for noncompliance
For the continued success of your business, it is vital that you comply with all of these requirements. You probably know there are penalties for not filing your federal taxes, but there are also penalties against your business if you don’t file your annual report with your state.
Penalties for non-filings can start with a fine and escalate to having your business removed from good standing with the state. Here are a few of the consequences for a business removed from a status of good standing:
- Vendors may decline to extend credit or refuse to do business with your company.
- Potential customers may pull out or require a certificate of good standing.
- The process to reinstate a good standing can range from hefty fees to re-qualifying your business in the state.
Keep tabs on your back office responsibilities
Annual reporting requirements can vary in each state by frequency and entity type. Some states may require you to file every year, while other states only require filing once every ten years. It is also important to recognize that your deadline to file may differ between a universal date that applies to all businesses and a date specific to your individual business (such as the anniversary of your formation). There are a few instances where the report is filed on even or odd years depending on the entity type.
An accurate and timely filed annual report is one of the many steps needed to keep your company in compliance with state authorities. When red tape piles up, ComplYant’s business tax platform can help you keep filing deadlines in sight and help you avoid costly penalties that could jeopardize your business.
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