As a business owner, there are different times throughout the current year where you must sit down and plan for the upcoming year. You must look at taxes, income, business goals, potential risks, and more.
You perform these audits to see how the company plans to grow in the next three to five years. Likewise, the state in which you formed the LLC wants to perform a similar action through a document called an LLC annual report.
This is not always a requirement, however it’s important to know how to write an annual report for an LLC and what information is required.
What is an LLC?
Business owners choose to form a limited liability company (LLC) because with this business structure they’re not personally liable for the company's debts. Additionally, owners enjoy the combined perks of a corporation and a sole proprietorship.
One of those perks is pass-through taxation, where the LLC doesn’t have to pay taxes at a business level. When a business is registered as an LLC, they get the legal protection they desire while also having the flexibility to run their business as they see fit.
What is an LLC Annual Report?
An LLC annual report is a statement of information provided to your state that lists out the important details of your business. It also shows any updated information or changes that have occurred since the last filing period. This information included things like the names and addresses of directors or members, as well as the registered agent’s information.
The primary purpose of an annual report keeps your LLC compliant with all state regulations and in good standing to receive LLC benefits.
Information Included in the Annual Report
The information you include in the LLC annual report varies from state to state. However, in most states, you’ll usually have to include the following:
Company Address – The company address is the physical address of your business – it does not have to be the registered agent’s address. It’s important to update any changes that have occurred within the last year.
Managers – Management information must be filed and updated on the LLC annual report as well. This means updating the names and addresses of the LLC managers, as well as any other pertinent information.
Purpose of Business – When every LLC is formed, the owner must list the purpose of the business. A flexible feature for an LLC entity is being allowed to change the purpose of your business. If this does change, now is the time to file that information.
Business ID numbers – Take an inventory of business ID numbers that you use or new ones that you’ll need. Any business ID numbers must also be updated in the LLC annual report.
Shares issued by the company – This information is important tax information that you want to keep updated and handy.
Registered Agents – As previously mentioned, it’s important to update the name and address of the registered agent (if needed) because this is the person who receives legal documents on your business’s behalf.
How to file an Annual Report?
Once you have completed the form for an LLC annual report, you must then submit it to the state along with the required filing fee. The filing fee varies based on state. You can submit this at the state office or online.
In some states, filing an annual report is not actually required. If you choose to file, the annual report costs approximately $200 and is due no later than June 1 of each year following the year in which the application for registration takes effect.
When it comes to the details of filing, it also varies greatly based on the state. For example, as mentioned above, some states require LLC annual reports, others do not. Some states prepare forms with the most current information on file, others provide blank forms for the members to fill out. Regardless of the state you file an LLC annual report in, you’ll always find a filing fee attached to it.
What Happens if you don’t
file an annual Report?
Filing annual reports can be stressful and confusing because the requirements depend on how the state classifies your business. Annual reports in all states show that your company is still active and in compliance.
If you do not file on time, the state can terminate your LLC and you’ll have to work hard and pay extra to have it reinstated. In addition to the filing fee, you’ll also have to pay a $50 late fee, plus a 5% penalty on the taxes you owe. If you don’t pay within the first month, the office will charge you another 5% penalty.
To ensure your LLC is properly set up and that you don’t miss any tedious details on forms like an annual report, it’s important to consult (and work) with a business lawyer. A professional will ensure all information within the LLC annual report is correct and that you stay in compliance with the state.