What Is an Annual Report?
Your healthcare business entity (LLC, PLLC, or corporation) must file an annual report to remain in good standing. What do you need to know?
Doing business as a limited liability company or a corporation comes with many benefits, such as limited personal liability for your business’s actions. However, to maintain these benefits, it is essential that you observe a number of corporate formalities.
One such corporate formality is keeping up with the requirements to maintain good standing with your state. Requirements usually include filing an annual report document, sometimes also known as a statement of information.
An annual report contains basic information regarding your business, such as your principal business location, the name and address of your registered agent, and the names and addresses of your managers and directors. In some cases, it can also serve to provide interested parties with a general overview of your business’s financial condition and operations over the previous year.
How do I file an annual report?
The filing date for annual reports varies by state. The due date may be either a fixed date dependent on your entity type or a date that coincides with your business’s formation or qualification anniversary. Generally, the business’s registered agent will receive a notice by mail that the due date for filing your annual report is approaching. Once you receive this notice, you or your registered agent must complete the annual report document online or download a paper form. The completed annual report and an accompanying fee should be submitted to your Secretary of State.
What happens if I don’t file an annual report?
Financial Penalties or Late Fees
Most states impose financial penalties, in the form of late fees, for failing to file your annual report on time. These penalties vary by state, but they can be fairly substantial. For example, a state may assess a fee for every month that your annual report is late. If, after a set number of months, your report has still not been filed, the state may revoke your business status.
Loss of Good Standing
Timely filing of your annual report also ensures that your business remains in good standing with your state. If you do not file your annual report, some states offer a grace period of several weeks to months before your business’s status changes. However, many states will revoke your good standing immediately after the due date
A loss of good standing can lead to difficulties securing capital and financing, an inability to close contracts, and a possible loss of access to courts, among other consequences. However, one of the most serious consequences is the ability of others to pierce the corporate veil. In this scenario, you and your other business owners could be held personally liable for the business’s actions and, therefore, any business debts.
In analyzing whether or not the corporate veil may be pierced, courts will take into consideration the business’s standing and whether the business has kept up with its state’s filing requirements. If a business has not kept up with the filing requirements and is not in good standing, the court is more likely to rule in favor of piercing the corporate veil.
Get Legal Support
An experienced business attorney can assist you in implementing best business practices to ensure that you comply with all corporate formalities, including filing your annual report correctly and in a timely manner. The healthcare attorneys at Jackson LLP want to help you oversee a successful and compliant practice or business. If you operate in one of the states where we practice, book a free consultation to determine if we fit your needs.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.