Annual report filings: Trending challenges solved
Annual report filings play an important role in entity compliance. Most states have information reporting requirements for business entities, commonly known as annual report filings. An annual report is used to update or confirm the Secretary of State’s records. It is not a financial statement but rather a business entity filing. The information required and provided on your annual report filing should always be the most current data on record with your company. The report is required whether you need to make changes to the previous report or not. And that’s just the start.
Common challenges of annual report filings
Annual report filings come with a complex set of challenges. For instance, while the word ‘annual’ would lean towards the assumption that annual report filings are required once a year, that is actually not the case at all. The term ‘annual’ in the name of the filing is misleading, as not all states require entities to file a yearly report. Some states filing requirements are biennial, or every other year, while in more rare instances a state may have decennial filings, or once every ten years.
Additionally, the data required to be completed within your annual report filing can also vary by state and entity type, and can require information such as business address, mailing address, number of offices, names of officers and board of directors, titles, and more.
But the challenges don’t end there.
Other challenges related to annual report filings include:
Relying on state notices.
State notices are not always sent to your registered agent. While some states provide annual report filing notices to your registered agent, others do not. For those that do, often enough notices are sent too late making it nearly impossible to effectively address the notice within the time required.
State-delayed processing time.
Even when annual report filings are submitted on-time, there is always a risk that the processing time will be delayed by the State. Whether it be labor shortage or workload increase, processing time can be inconsistent putting your company at risk.
Filing rejections.
While you have completed and filed all necessary information, should there be even the slightest error you risk your annual report filing being rejected. With several reasons, varying by state, for rejection of your annual report filing it can come as a surprise should you get an actual letter of rejection. Reacting to state notifications puts your company in a risky situation.
Data inaccuracies in spreadsheets where required
annual report data is kept.
Many organizations choose to track their entity data in spreadsheets. This may work for smaller companies, but as your company starts to expand, or the busy season is upon you, timely updates to your manual spreadsheet get missed. Not to mention, if more than one person has access to this spreadsheet, version control can be a real issue.
Ever-changing state law and regulatory changes.
Change is truly the only constant. That said, State laws and regulatory changes frequently occur without notice, yet the expectation is that your filings are in accordance with the latest set of state regulations. You’ll have to quickly amend your annual report filing and you’ll have to ensure you’re up-to-date on every state law and regulatory change.
Extensive wait times for assistance from the State.
As the nature of annual report filings becomes more complex, the need for assistance increases. While you do have the ability to contact the State for help in completing your filings, you should anticipate a pretty hefty wait time for assistance which can lead to greater delays and frustration, not to mention you’re sacrificing the time in your day you need to focus on bigger company objectives.
With complexities and varying state requirements the effects of these challenges can lead to serious complications for your company.
Missed deadlines, major disruptions
It’s important that annual report filings are completed on time to maintain an ‘active status’ with the Secretary of State. In fact, they must be filed on time or there are some serious consequences to face. If you miss an annual report filing deadline you not only risk losing good-standing status, but your entity can be administratively de-registered or revoked causing major disruption to your business. Your company will be subject to significant financial penalties and tax clearance requirements and, potentially, required to file additional filings.
Financial penalties, wasted time
Financial penalties for late annual report filings can include some hefty fines that are likely not in your budget. And, the process can be time-consuming. Once again, fees, penalties, and paperwork required for compliance varies by state. Some states have set late fees, while others have interest and penalties that accrue over the amount of time in which you remain non-compliant. In some states, you’ll also be responsible for additional filings, reinstatement or even tax clearance. Once you’ve satisfied all of the State’s filing requirements and payment of fees you’ll be recognized as compliant and back in good-standing, but the process to get there can be expensive and tedious.
Good-standing or BUST
Fines and additional filing requirements are not the only issues you’ll potentially face. Annual report filings ensure you remain in good-standing which essentially protects your business from a corporate perspective. If your annual report filing is late, you run the risk of your company being administratively dissolved by the state and you lose limited liability insurance protection. Active status is necessary for the company to be lawfully recognized to transact business in the state of registration.
Often times missed annual report filings occur when a company is manually handling annual report filings with spreadsheets and managing multiple calendars for varying states. With due dates and compliance requirements differing in every state, keeping track of these requirements and deadlines isn’t always easy. Operating your business in one state may seem simple enough to keep compliant on your own, but that’s not always the case. And, operating in several states with multiple locations across the country presents challenges you simply don’t have time to manage.
You need complete confidence in your annual report filing. You need an expert registered agent. You need Computershare. And here’s why.
Ensuring your entities are in good standing is crucial. Computershare allows you to be confident that your annual report filings are submitted on-time and accurately keeping you and your company positioned for success. With Computershare you get a partner who lightens the load and a technology solution centralizing your processes. Our compliance experts prepare and file annual reports on your behalf giving you much needed time back in your day. And our Global Entity Management System (GEMS) offers you full visibility into every step of the process keeping you in the loop with a dashboard view when it’s convenient for you. By pulling the data required for annual reports right from GEMS, you gain accurate filings without interruptions and never pay a preparation fee. Spreadsheets become a thing of the past! From start to finish your annual report filings become fully automated and are simple, efficient and hassle-free when you partner with Computershare.
