LLCs are widely favored as a business entity type because they’re easy to form. They’re equally simple to maintain. Of course, “easy” does not mean “no requirements.” The LLC does have a few responsibilities each year. The most common requirement is the annual report.
Completing the annual report is a relatively simple process. But since it’s so important, we’ve compiled a guide to the essentials to annual reporting. We’ll cover what an annual report is, why it matters, where it’s required, and even how to file it.
What is an Annual Report?
An annual report essentially gives a summary of the LLC’s business activities for the year. It gives the reader an idea of what your income and transactions have been like. In some states, the annual report is known as a Statement of Information, an Annual Statement, a Biennial Report, a Periodic Report, an Annual Renewal, or other names.
Usually, you file the annual report with your Secretary of State. However, a few states require the report as a part of an annual business tax packet. These annual reports would be filed with the state tax office.
In addition to summarizing your LLC’s financial activity, the annual report informs the state of any changes to your business. This is especially important if you’ve recently switched registered agents or moved to a new location. Address and agent changes need to be communicated in a timely manner so there is no interruption in service of process.
Why Does the Annual Report Matter?
An annual report is a legal requirement in most states. Filing it each year maintains your good standing. If you fail to file it, your LLC could be administratively dissolved. Then you’d have to go through the complicated process of reinstating your LLC; it’s much simpler to just file your reports on time.
Once filed, your annual report becomes a document of public record. Anyone who wishes to can read your report. This helps maintain business transparency; your business activities are visible to all consumers in the state. The report also helps the state know exactly how many businesses are operating in the region.
Does My State Require an Annual Report?
A vast majority of states require an annual report. However, the following states require a less-frequent report:
- Alaska (Biennial)
- California (Biennial)
- Indiana (Biennial)
- Iowa (Biennial)
- Nebraska (Biennial)
- New York (Biennial)
- Washington D.C. (Biennial)
- Pennsylvania (Every 10 Years)
The following states do not require a report at all:
- New Mexico (pass-through LLCs must file a PTE, though)
- South Carolina (excluding LLCs which file as an S Corporation)
Like we’ve mentioned earlier, there are a few states which have a unique type of annual report. Rather than filing with the Secretary of State, LLCs in these states file an annual finance report as part of the annual business tax program. These states are Alabama, Arkansas, Delaware, and Texas. You’ll submit your income report to the Department of Revenue or the Comptroller.
How Do I File My Annual Report?
Filing your annual report is a relatively simple process. However, you won’t want to overlook any aspect of this important document. To help you complete the filing, we’ll cover the steps to filing an annual report.
- Confirm the due date of your report. In many states, your annual report is due by the close of your LLC’s anniversary month. Other states require every business to file the report at the beginning of the calendar year. There are other filing dates, so it’s important to consult your state’s guidelines. In some states, the Secretary of State will send you a reminder that the report is due. If not, you’ll want to set up a reminder of your own.
- Determine where you need to file the form. Most states can file their report with the Secretary of State. Those states that require an income report as part of the annual business tax package will file with their tax office instead.
- File online or by mail. Many states prefer that you file your annual report online, but you can usually request a copy of the annual report form or find it on your state’s website. Understandably, mail-order filings take longer to process. Most states request the following information on the annual report:
- Your business name
- Your business ID number
- Principal office address
- Name and address of your registered agent
- Include a copy of your financial records for the year. Many states require that you include a summary of your finances on the report. This requirement helps maintain the financial transparency of businesses in the state. This record doesn’t need to be comprehensive, but it should summarize your major transactions, investments, and capital expenditures.
- Pay the filing fee. All states that require an annual report also charge a filing fee. The size of the fee depends on the state, with a range varying from $40-500. If you file online, you’ll need to pay with a credit or debit card. Mail-order filings can pay by check or money order (usually made payable to the Secretary of State).
- Repeat annually (or as often as your state requires).
Annual reporting is a vital component of operating a compliant LLC. Neglecting to file it can even cost you your business! But thanks to this guide, you’re fully prepared to file the report each year.