The limited liability company (LLC) is widely favored as a business entity type, in part because it’s relatively easy to form and equally simple to maintain.
Of course, that doesn’t mean there are no ongoing maintenance requirements, as the LLC does have a few responsibilities each year, with the most common requirement being the annual report.
Completing the annual report is not a particularly difficult process, but since it’s so important, we’ve compiled a guide to the essentials of annual reporting. We’ll cover what an annual report is, why it matters, where it’s required, and how to file it.
Rocket Tip: If you’d prefer to not deal with ongoing requirements like annual reports yourself, services like ZenBusiness and LegalZoom offer fully managed annual report services. They take care of everything while you focus on building your business.
What Is an Annual Report?
An annual report essentially gives a summary of the LLC’s business activities for the year — it gives the state an idea of how your business operates, and keeps the government updated regarding any relevant changes to your business. In some states, the annual report is known as a statement of information, an annual statement, a biennial report, a periodic report, or an annual renewal.
Usually, you file the annual report with your Secretary of State, but there are some states where you’ll need to file it with a different government entity. To be on the safe side, you should check with your state before preparing your report.
In addition to summarizing your LLC’s 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, and filing it each year maintains your good standing with your state. If you fail to file your annual reports, you will almost certainly face some sort of fine, and your LLC could eventually be administratively dissolved as well.
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.
The reason the annual report is so important is because it ensures that your state has updated information for your LLC. If you don’t file your annual reports, the state’s information regarding things like your business location and your registered agent could become outdated.
In this case, the state might not have the correct contact info, and you might not even hear about a potential lawsuit against your company until it’s too late.
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)
- Pennsylvania (Decennial)
- Washington D.C. (Biennial)
The following states do not require a report at all:
- New Mexico
- South Carolina
A handful of the states that do not require annual reports do require a yearly franchise tax payment, which is also known as a business privilege tax return. These states include Arkansas, Delaware, and Texas.
In addition, there are also a few states that require both an annual/biennial report and a franchise tax payment, like Alabama, California, Connecticut, Kentucky, New York, and Tennessee.
How Do I File My Annual Report?
Filing your annual report is a relatively simple process, but you don’t want to overlook any aspect of this important document. To help you complete the filing, we’ll cover the steps required to file 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 as well, 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, but 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 may need to file with their tax office or Department of Revenue 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 often 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 (this can be a person or service)
- Include a copy of your financial records for the year: Some states require that you include a summary of your finances on the report, which helps maintain the financial transparency of businesses in the state. This record doesn’t typically need to be comprehensive, but it should summarize your major transactions, investments, and capital expenditures.
- Pay the filing fee: Nearly all states that require an annual report also charge a filing fee — Idaho, Minnesota, and Mississippi are the only states that require annual reports that do not charge fees for them. The size of the fee depends on the state, with a range varying from just $10 all the way up to several hundred dollars.
In most states, LLCs are required to file annual reports as a way to keep the state government updated regarding any important changes to your business. Whether you’ve moved to a new address, changed registered agents, or altered the ownership of your company, your annual report provides a convenient place to inform the state of these changes on a regular basis.
It’s not too difficult to file annual reports, but it is tremendously important that you remember to file one, because the penalties for failing to do so can be steep, and can even result in your business losing its LLC structure.