What is the purpose of an annual report?
The purpose of an annual report is to share details about a public company's finances. By disclosing certain operational and financial activities, annual reports keep company stakeholders informed and organizations accountable to the government and the public at large.
In addition to legal compliance, annual reports also provide important information to prospective investors who want to evaluate a company's financial performance.
Are annual reports required by law?
All U.S. states, except Ohio, require some form of an annual report, but the filing requirements and details vary from state to state.
While compiling a complete list of annual report filing requirements by state may seem like a simple task, knowing what applies to your business, or how to complete the reports, can be challenging. Even for common documents, such as the Statement of Information, requirements vary from state to state. To be clear on the applicable requirements for your business, ask a lawyer.
Who is required to file an annual report?
Companies in locations where an annual report is required by law must file an annual report. For some businesses, this may mean filing a report in multiple states. States, however, are not the only source of such a mandate.
Many companies prepare annual reports to uphold fiduciary duties to shareholders, employees, and other stakeholders. At times, these reports are required by company bylaws or federal laws regulating investments.
What is required in an annual report?
The purpose of an annual report is to maintain transparency. An annual report must feature data and analysis about a company's financial performance and activities over the past fiscal year. Public companies have a duty to their shareholders and the public to operate in an ethical and straightforward manner. As a result, any information that is necessary to make a full, complete, and transparent disclosure without compromising trade secrets or confidential information should be included in an annual report.
When do I file an annual report?
This is a simple question with a complicated answer. In short, when your company is required to file an annual report varies substantially based upon where it was organized and where it operates. Here are a few examples:
- Arizona, Illinois, and Connecticut require businesses to file an annual report every year on the anniversary of the business's formation.
- Idaho, Nevada, New Jersey, and Missouri require an annual report to be filed by the last day of the business formation anniversary month.
- Kansas requires the report be filed each year on the 15th day of the fourth month after the close of the business's financial year.
- In Massachusetts, a company must file an annual report within 2.5 months of the close of the fiscal year.
- Hawaii requires businesses to file an annual report each year during the quarter that contains the anniversary month of the business formation.
- Florida, Maine, Kentucky, Montana, and other states require an annual report filing by a set date, although that date varies by state.
Preparing an annual report requires a substantial investment of time, data, and resources, so do not hesitate to get help early on to avoid compliance issues. While many organizations may opt to retain costly big firms for their filings, many more are turning to digital solutions instead. Rocket Lawyer not only offers a full suite of compliance documents for organizations in every state, Rocket Lawyer members can get attorneys to review their documents at an affordable price.
How do I file an annual report?
Filing an annual report requires completing the proper paperwork and following your state's guidelines for filing. The proper forms are nearly always available online.
New Jersey, Florida, Colorado, Illinois, and other states have built online platforms designed to make annual report filings easier for business owners. Because the process seems easy, many business owners will file their own annual reports. Since mistakes can be costly, even when the process appears to be straightforward, having an attorney review the filings before submitting them is often well worth it.
It is not enough that these documents are filed on time with the proper entity. Businesses need to make sure their reports are also backed up by enough data to stand up to inquiry if questions are raised. Additionally, you must file an annual report in every state in which your business is registered, so it may be necessary to repeat the process and manage multiple deadlines and different requirements.
What happens if I fail to file an annual report?
Failing to file an annual report when and where it is required can result in consequences, including late fees or the revocation of a company's legal standing. Once a company loses its standing, it could lose its trade name and risk potential administrative dissolution or revocation of its right to do business in the state if the issue isn't fixed. There may also be additional tax or legal consequences in the form of fines, penalties, and lawsuits.
If a company misses a deadline, it may be able to avoid severe consequences by filing the required report late and paying a late fee or penalty before a government or shareholder can take action.
Is an annual report the same as a shareholder report?
An annual report may be the same as a shareholder report in some circumstances. An annual report is required as a matter of law in a particular state. A shareholder report is published by public corporations on a yearly basis to ensure transparency regarding financial data and ownership, but it may be more in depth than an annual report.
Any organization considering a shareholder report should work with an attorney to ensure accuracy and appropriate publication of a shareholder report document. Corporate finance is a complex matter full of potential pitfalls.
Rocket Lawyer offers members corporate finance, recordkeeping solutions, and filing services to help you stay on top of compliance requirements. If you need additional assistance, ask a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.