Everything You Need to Know to Stay in Good Standing
Keeping your corporation or Limited Liability Company in good standing is a critical, and often challenging, part of running your business. Staying in good standing means filing an annual report in every state where you conduct business, and adhering to the deadlines and unique business information requirements of every jurisdiction. If improving your understanding and management of annual reports is a priority for 2020, we’re here to help.
Join us for a recorded webinar as we review some of the most common questions that come with preparing and filing annual reports: When are they due? How do I find the requirements for each state? How can I check the status of my annual reports? What happens if I miss a deadline?
Whether you’re seeking an introduction to help tackle your 2020 filing requirements or a seasoned professional looking to improve your processes, this free online event has you covered. CSC has extensive experience managing annual report preparation and filing for businesses of every size in all 50 states, as well as the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, the Northern Marina Islands, and Canada. Tune in as two of our experts share their tips to keep your business in good standing.
Annie: Hello, everyone, and welcome to today's webinar, "2020 Corporate Registrations: Everything You Need to Know to Stay in Good Standing." My name is Annie Triboletti, and I will be your moderator. Joining us today are Ciela McDevitt and Christine Matarese. Ciela is a Corporate Solutions Manager for the Corporate Legal Solutions division of CSC and has over 14 years of experience. Ciela is responsible for customer satisfaction, technology training, and new services. Christine is a Corporate Trainer on the Annual Reports Service team based at CSC's global headquarters in Wilmington, Delaware. With over eight years of experience, Christine focuses on training new customer-facing team members and provides continuing education. And with that, let's welcome Ciela and Christine.
Ciela: Thank you, Annie. I'd like to introduce CSC. CSC works with 90% of the Fortune 500. We support over 10,000 law firms throughout the U.S. We have over 3,000 financial clients that we service with our UCC and real estate eRecording services, and we represent 65% of the 100 best global brands. Since we're here today to talk about annual reports, I'll let you know that last year, in 2019, CSC filed over 300,000 reports.
Today, we'll cover what is an annual report. We'll talk about the deadlines as they're different in every state, and even depending on the entity type. We'll talk about what's required to be submitted with the filing, consequences of not getting the filing in on time, differences between an annual report and a business license, how CSC can help with the process, and benefits of using CSC.
What is an annual report? An annual report is, for purposes of this webinar, what's filed to stay in good standing with the secretary of state. So, for corporate registrations, whether it's an LLC, corporation, nonprofit. In many states, they have an annual filing that needs to be submitted in order to keep that registration active. In some states, they're called different things, like a statement of information, an annual list of officers, sometimes it's a franchise tax report. So we'll be going through all of that in today's session.
Christine: So now that we know what an annual report is, thanks to Ciela, the next question is when are annual reports due. Due dates can vary depending on the jurisdiction that your company is registered in. The most common due dates are centered around your fiscal year-end, your anniversary month, or your anniversary date, or on a day annually as determined by the jurisdiction. For example, the fiscal year-end due dates tend to be based around your financials, and these tend to be states that do require some type of financial information on the filing. Many of these are due, for instance, the 15th day of the third month following the close of your fiscal year-end.
Anniversary months can be anytime within the anniversary month. Some states dictate it's the first day of the month, such as Wyoming. Other states are going to be due by the last day of your anniversary month, such as New Jersey or Washington. These anniversaries are referring to the date that you registered in that particular state, which could be different than your original formation date in your domestic jurisdiction. Anniversary date is going to be the exact day you registered in the state, such as Arizona and Utah, and then specific days, as determined by the jurisdiction, a lot for the majority of our annual report filings that we handle. Delaware domestic corporations are all due on March 1st. Georgia entities are all due on April 1st. And all Florida entities are due May 1st.
In addition to these specific due dates, there are some other states that have a biennial filing where your report is due every other year. Just as the annual report due dates can vary, the biennial report due dates can vary. Indiana and New York are biennial by your anniversary month, New Mexico is biennial depending on your fiscal year-end, and D.C. and Iowa are on dates determined by the state. States have varying requirements, which can also vary within the jurisdiction by entity type as well. So Delaware corporations are due March 1st. Delaware LLC, they're going to be due June 1st.
I know we've already talked about what an annual report is and when they're due. What happens if an annual report is missed? The majority of states are going to have some type of financial penalty as a result of missing your annual report. Large late fees can be assessed. Illinois is going to assess additional late fees for every month your report's late, and depending on your financials, those fees can be in the tens of thousands of dollars. They will also revoke your entity after five and a half months if your report isn't filed, triggering the need to file a reinstatement plus any past due annual report filing. Wyoming, the reinstatement fees can be over $10,000 if you fail to file your report within the allotted timeframe. Once again, that is a state that is based on your financial situation.
The Missouri Secretary of State would require tax clearance from the Department of Revenue to fulfill the reinstatement requirement. And New Jersey is another one that has a tax clearance element as well. And some states like Utah would actually require that you requalify your entity in order to go ahead and get back into good standing. That can have major implication. When you requalify your entity, you are issued a new state ID number, you have a new filing date with the state, which can affect when your report is due, and that can also have implications down the line for the rest of your business as well.
In addition to the financial penalties for not filing an annual report, there are a number of other items that can happen as well. The first and most common item is that you have a loss of good standing. Many entities . . . or many jurisdictions, rather, don't have a grace period for the annual report. As soon as you miss that deadline, you lose your good standing status. You will become either delinquent or possibly in an inactive status. That has ramifications because you're no longer able to obtain a certificate of good standing from the state. That document is needed for a variety of reasons, such as potentially opening a bank account or entering into a contract with another party.
Other states request a certificate of good standing if you're attempting to register to do business there as a foreign corporation as well. After a period of being inactive, many jurisdictions will then revoke your entity. We talked a minute ago about Illinois. That happens after five and a half months. The length of time before an entity is revoked depends on the jurisdiction as well. Once that revocation or that forfeiture happens, you do need to file a certificate of reinstatement in order to return to good standing. That can be a lengthy process.
Like we said, there is numerous states that require tax clearance, that can require financial information, and it can require filings with the Department of Revenue for that particular state as well. As soon as you lose your standing or become revoked, in some jurisdictions, you may lose your name. Your corporate name is now available should another business come in and register to do business in that state. Once you are ready to file your reinstatement, you may find that your name is no longer available and you have to choose another name to do business under in that particular jurisdiction.
Obviously, there are some substantial implications that that could have to your business. If you are inactive in the state, if you are not in good standing, you may be unable to bring a lawsuit. You have not adhered to the state statutes to keep your entity in compliance in that jurisdiction, which means you may not have the benefits of the corporation of that entity. Your corporate veil could be pierced should a lawsuit be brought against you, meaning your personal assets may be at risk.
Your ability to conduct business is compromised, as implied in everything we just mentioned. If you're not in good standing in the state, that can affect other licensing options and other contracts you may be involved in.
We did talk about the penalties and fees that could incur. There are a number of states like Illinois that do charge monthly interest. Delaware is one of those as well. We did mention also about the states that require a requalification. That can be not as lengthy as tax clearance, but as I said, it's basically registering a new entity in the state, which can affect everything from your licensing to your financials.
Ciela: Thank you, Christine. This is Ciela to talk about the international entities. So I want to preface this slide by explaining that you never want to assume with an entity that's outside of the U.S. that the compliance mirrors what you see with the U.S. state and that it's just an annual report you need to file to stay in good standing. In many countries, it's totally different. There might be a registered office requirement, you may have to keep a minute book on-site in-country, there can be VAT filings, and annual financial statement filings, and a requirement for an annual general meeting.
That being said, there are some similarities when you look at the U.S. territories and Canada. So the U.S. territories like Puerto Rico and Guam, they do have an annual report. You do want to be careful to make sure that you're monitoring those. For example, in Puerto Rico, the annual report filing fee is $150, but if you miss it, there's a $750 penalty. So they can be pretty extreme, as well as the other consequences. Canada, in many of the provinces, there are annual reports that need to be filed as well as other minute book requirements. The good news is that if you have questions about any of this, CSC can assist. We do prepare and file annual reports in all of the U.S. territories where they're required and in all of the provinces of Canada.
We've added this slide on business licenses because it often gets confused with the annual reports, and there are some key distinctions. The first is the annual reports are really state level because they're what's required to keep the corporate registration, whether you're a domestic corporation, or a foreign qualified corporation, or LLC in a state. Where the business license is more local, jurisdiction-driven, so there can be requirements with the city or the county, sometimes the state, and it often revolves around where your business has a physical location.
The other key distinction with business licenses and annual reports is that business licenses vary greatly depending on the industry or the type of business. So a restaurant is going to potentially have food license, and also a liquor license, and then also maybe like a business tax receipt or just a general business license for operating in a city or county. And that could be completely different from an insurance provider that needs insurance producer and agency licenses with the Department of Insurance. So it varies greatly depending on the type of business and the location, whereas an annual report, what's required really depends on the type of entity and the state where it's registered.
So, if you do need to learn more about business licenses, or maybe that's why you came to the webinar today, let us know. We do have a whole department that specializes in researching license requirements. We can prepare and file the applications much like we do with annual reports, and then we can also monitor the licenses for expiration. And that is one way in that they're both similar, is that business licenses like annual reports, there's usually a filing each year that's required to stay in good standing. So it does make completely good sense that they get confused all the time because they're similar, but there's also those key distinctions. So, if you do want to learn more about that, there'll be an opportunity at the end of the session to ask questions or request more information.
Many of our registered agent clients utilize CSC to monitor, prepare, and file the annual reports. And there's many reasons for doing so. The first and probably the most challenging is that many states no longer send notifications. And when they do, they can be really inconsistent. So we'll sometimes see states send postcards one year, and then the next year they won't because there's been a budget cut. So that can make it difficult to track.
Also, there can be legislation changes that will change due dates and requirements, and that's something based on our business that we track. So we're going to stay on top of all the legislation changes with the filing requirements so that you don't have to. Of course, we take on the risk when we're monitoring the annual report so that if we're monitoring your annual reports, we are the ones responsible. So we make sure they get in on time so that you would avoid any penalties or fees. And often, having CSC prepare and file the annual reports saves time for your key employees so that they can work on more important matters or revenue-generating activities.
Christine: So Ciela just talked about some of the benefits of using CSC to maintain and file your annual reports. What I'm going to talk about now is kind of what the service looks like and what you can expect if you do enroll in it. Ciela did a lovely demonstration for you guys of CSCNavigator. If you are an annual report client, you have access to that . . . as a registered agent client, you have access to that, rather. But as an annual report client, you do have some additional access as well.
We store all of your annual reports in Navigator for you so you can view them at any time. You have 24/7 access to it as well. One of the first things we're going to do when you do enroll in the service is we're going to complete an audit of all of your current entity portfolio. We're also going to ask are there any other entities you would like to enroll in the service. We will complete an audit of those as well.
Now, when I say an audit, what we're going to do is we are going to go and reach out to each state and check the status. We're going to capture what your current status is for each entity in each jurisdiction, we are going to verify when the last annual report was filed and when is the next annual report due according to the state. This audit is an excellent part of the service. Maybe you had some transition in whoever was handling your annual reports previously, maybe some things slipped through the cracks. This is going to let us identify which entities may be past due and what may need to be reinstated or possibly just have a past due report filed.
Next, Ciela showed you the CSC Good Standing calendar as part of our Navigator platform. The Good Standing Calendar is fully integrated with our Annual Report Prep and File service. And what that means is that this calendar drives when we are filing your annual report. You can take a look at the calendar at any time by logging into your account and viewing it to see what annual reports are coming up and what we will be filing for you. It is fully integrated as well. There is a column on there, the in-house managed versus CSC managed. That can let you know what reports is CSC taking care of for you versus maybe there are one or two jurisdictions you want to keep in-house or one or two entities you want to keep in-house.
The Good Standing calendar is also going to update as we complete your filing. So, as we file each report, the status is going to move from "In progress" to "Filed." That way you can keep track of what CSC has completed on your behalf, right from your Navigator portfolio. Evidence. As I said, the filed annual report documents are stored in Navigator. You have access to them at any time. Many of our customers choose to simply retrieve those documents themselves as they need them. You do have the option where we can email you the filed report as soon as it's completed as well. As I said, we have point-in-time reporting on your entity status as well.
The Good Standing calendar is fully integrated. You can also see results and changes as they happen. There are a handful of states that do require state-specific information. If that is the case, we will be reaching out to you for that information. You will see the status change maybe to "Document not submitted" or "Entity data requested." That's going to clue you in that we need information from you to complete your report filing, which leads me to the next point. A dedicated team to provide you with peace of mind. You will be assigned an individual account report specialist that will be managing your portfolio, but that person is going to work with the team here at CSC to ensure your filings are completed promptly and accurately. Your annual report specialist will be reaching out to you once a month to let you know if you have filings due that require additional information.
We're able to file most annual reports with the basic information you provide when you initially enroll in the service: your business address, your mailing address, a statement of purpose, your officers, directors, members managers for an LLC. There are a handful of states that do require state-specific information that we do not capture. So what happens is, as those reports come due, we reach out and ask you for that. My favorite example that I use all the time is West Virginia. The state wants to know if you have an entity registered in the state, is that entity a scrap metal dealer. And if you say yes, they have a bunch of follow-up questions. This is the type of information your annual report specialist will be contacting you about as those reports come due.
There are other states that do have additional questions. New Jersey has questions around workers' compensation. A number of states have questions regarding do you own property in the state. Many of them are simple yes or no questions that we will ask as they come up. CSC will advance these on your behalf as we are filing the reports as well. I do have a caveat. It is up to $10,000. So, if you have some pretty high financials for some of those states like Illinois or possibly Wyoming, we may be reaching out to you to get payment in advance prior to filing with the state. But for the majority of the other states where the filing fee is just a few hundred dollars, we will advance that, and then we will invoice you according to your workflow.
We have a number of invoicing options available to fit your needs. We can send you individual invoices as each filing is completed. We could also enroll you in our summarized billing, which would result in a monthly statement of your invoices being sent to you each month.
One of the other things that we do take care of for you is we do maintain your officers and directors in our records because that is the information that we are using to file your annual reports. We do ask for that upfront when you go ahead and enroll in our service. We simply ask that you let us know anytime you have changes to that information, so that way we can file with the most accurate information possible.
Ciela: Thank you, Christine, for going over the benefits of using CSC. Hopefully, that has you thinking about evaluating the process with us. But if you're just evaluating it in general and even thinking about keeping it in-house, here are some things to think about. What process do you have in place to make sure that the annual reports are getting in on time, and what does that look like? Is there a budget for penalties or fees that are assessed by the state if an annual report is missed, and what's the plan of action if that does happen?
What's the process if the person managing your annual reports gets promoted or takes on another position? What's the process for transitioning that? Because that is often an area where we see things get missed. What is the backup plan to file an annual report if the state website goes down? This is actually more common than you think, particularly with Delaware and particularly right at the due date. And it's not that there's any problem with their technology, necessarily, it's just that worldwide, there's so many Delaware corporations and LLCs and I guess there's a natural tendency to procrastinate.
So everyone will get on for the Delaware corporation due date on March 1st or maybe the last day of February and try to get it in on time. And sometimes it will just overwhelm the state website and they'll experience outages. So CSC actually has a backup method to file a Delaware annual report because of that. So that's something to keep in mind when you're timing out when you file the annual report, but also just having a backup in place for something like that.
The next bullet here, number five, how do you keep track of PINs? We're seeing this more often with security measures where states are sending out a custom PIN that you need to file online. So working internally to make sure that you know who those are going to and maybe, you know, looking into changing it so the right person is getting them. Maybe it was an officer who signed off on the company documents, but they're not the best person to track and file the annual reports because they're working on other matters.
Next, how do you manage and keep track of the evidence of the filing? So it can be handy at times to have a copy of the annual report as evidence. When we do the annual reports for you, we store those perpetually because we know how important it is to have a copy of that as proof that it was filed. So making a plan for organizing those documents.
And the other thing here that we don't have on the side, but I think it's important to mention, is tracking the information that will be used to file the annual report. And, most commonly, we see that being with corporations, officer and director information. With an LLC, it's members or managers. And whether it's member-managed or a manager-managed LLC, you'll often need your EIN or your federal tax ID number, a purpose of the business. Which, generally, on an annual report, if they're asking your business activity or business purpose, they don't want the general all lawful business within that state.
That works with a lot of incorporation documents, but on annual reports, if they ask, they typically want this specific business. Now, it can be one word like retail, or consulting, or real estate, or holding company, but it has to be something specific. So the officers and directors, EIN, business purpose, you'll often need the business address, and then who can sign on behalf of the entity.