The Importance of Annual Reports
July 11, 2022 | Written by Kelly Kutsor | 5 min read
You’ve finally started the business you’ve been dreaming about. You’ve made sure you’ve met all your legal obligations, including forming an official business entity, whether that be an LLC, corporation, non-profit, etc. You’ve put in a year of hard work, and can’t wait to keep building this business out. You think of all of the new products or services you want to sell, how you’ll reach new potential customers, and what the next year will hold for you. The next year feels like it is going to be even better than the first. You’ve overcome all of the paperwork to turn this dream into reality, and it feels like it is finally smooth sailing.
However, as a new business owner, you forgot one thing: your business entity needs some yearly upkeep. There is still work to be done after all of the initial paperwork. You need to file an annual report for your business each year to ensure your business is up to date with your state’s Secretary of State.
What is an annual report?
An annual report is a document that provides your state with important details about your business along with any updated information or changes that have occurred since the last filing period. The information needed and fees associated vary from state to state, but we will focus on what Massachusetts requires.
Annual reports often include information such as:
Your Federal identification number
Your principal business address
The names and addresses of your members and/or managers
The general character of your business
A list of authorized signatories
Your registered agent’s information
Does this look familiar?
Annual reports require a lot of the same information you needed to file for your business entity in the first place. In Massachusetts, the annual report form for various forms business entities are nearly identical to their incorporation documents. You’ve done this once, and you can do it again.
Why is an annual report even necessary?
An annual report is an opportunity to update Massachusetts on all of the relevant facts of your business entity. Sometimes things change. You might have a new office address or a new mailing address. You might add or change the manager of your limited liability company. If the state doesn’t know what changes you have made, or if no changes have been made, they can’t be in a state of approval for your business entity. You have to keep them in the loop so you can operate your business without any roadblocks
Remember, running a business is a marathon, not a sprint. It sure can feel like the beginning of creating and running the business is where all of your efforts should go, but in order to keep your business afloat, you have to keep the pace and check all of your yearly boxes.
What are the costs of filing an annual report in Massachusetts?
For LLCS: $500 for paper filing, $20 extra for an electronic filing and expedition fee.
For Corporations: $125 for paper filing, $100 for electronic filing plus $10 for an expedition fee, $150 for a late paper filing, or $125 for electronic filing plus $10 for an expedition fee if filed late.
For Non-profits: $15 for paper filing, $3.50 extra for electronic filing.
Depending on the state you are in, these costs will vary. Electronic filing is highly suggested, as once an annual report is electronically filed your account is automatically updated. If you choose to file on paper, this will take longer as you have to take into account mailing and processing times.
Another important cost to consider when filing your annual report is the cost of having an attorney prepare and file these reports for you. Make sure you are aware of what these costs are from the beginning.
What happens if I do not file an annual report?
If you fail to file an annual report, or if you continually fail to file this report, your business entity may be administratively dissolved. Administrative dissolution, which is an action taken by the Secretary of State, means that a business entity loses its rights, powers and authority to conduct business within the State. Administrative dissolution can commence after two years of consecutive failures to file annual reports.
For example, an LLC administratively dissolved continues in existence, but cannot carry on any business except what is necessary to wind up and liquidate its affairs.
Can I stop my business from being dissolved?
Yes. There is a way to stop administrative dissolution, but it comes at a cost. There are various fees associated with different types of business entities. Not only do you have to pay these fees and wait through the process of having your business reinstated or revived, but you also have to pay all of the previous fees of your missing annual reports.
Depending on how behind you are on annual reports, this can make a low three figure fee jump into a four figure fee. Help yourself save time, money, and stress, by filing your annual report on time.
How much will it cost to revive my business entity once it has been administratively dissolved?
There is no way to get around doing the annual reports, so wouldn’t you rather get them done on time and keep your business up and running, rather than paying a larger sum all at once to try and start your business all over again?
Here are the costs to reinstate your business in entity in Massachusetts once it has been administratively dissolved:
For LLCS: $110 (to reinstate)
For Corporations: $330 ($110 to revoke dissolution, $110 to revive, and $110 to reinstate)
For Nonprofits: $46 (for revival)
If you have questions about your business or if you need help filing annual reports, we can help! Click here to schedule a consultation.
