Recorded Webinar - Maintaining Good Standing: The Best Way to File Annual Reports

Maintaining Good Standing: The Best Way to File Annual Reports

Please be advised that these free recorded webinar presentations have been edited from the original format (which might include a poll, product demonstration, and question-and-answer session). To set up a live demo, please complete the form to the right.

If you are concerned about keeping your company in good standing and don’t know how annual reports factor into it, you could be at risk for missing a deadline and incurring late fees!

Let CSC® help you maintain your good standing by filing your annual reports for you!

During this webinar, we will discuss:

  • Common challenges with annual reports
  • Real life examples of annual report filings and due dates
  • CSC’s Annual Report Preparation and Filing services
  • And much more!

We will show you how our services can take care of your annual report filings and maintain your good standing, while you focus on other pressing work.

Slideshare

Webinar Transcript


Anu: Hello, everyone, and welcome to today's webinar, "Maintaining Good Standing: The Best Way to File Annual Reports." My name is Anu Shah and I will be your moderator. Joining us today are Scott Mathews and Lauren Marshall.

Scott is one of the leaders of the Corporate Solutions Manager Team based in CSC's Wilmington, Delaware office, working with existing clients to maximize their partnership with CSC by providing assistance with important business filings, including annual reports. Scott's experience extends from startups to Fortune 500 clients.

Lauren has been with CSC for over four years and is currently the corporate trainer on the Annual Reports Service Team. Lauren focuses on training all new team members, as well as providing continuing education to ensure the team stays current on the most up-to-date state requirements.

And with that, let's welcome Lauren and Scott.


Scott: Thank you very much, Anu. I am Scott Mathews, as Anu had mentioned, and I am joined here by the brains of the operation, Lauren, and we will be talking with you guys today in regards to our annual reports. Not just the services that CSC has to offer, but some of the challenges that we typically find when talking with our various clients.

Some of the subjects that we will go over here today will be involving specifically what is an annual report, identifying the actual names that you might hear an annual report called by, the filing and reporting deadlines. As far as having a lot of different names, they certainly do that, but they also happen to have a lot of different due dates and it can vary depending on your entity type and the state that you are operating within.

We'll talk about the different filing requirements, how filings need to be handled, certain questions that certain states might ask that other states are not asking, consequences of not filing, which obviously is a very big topic because no one ever wants to see their bottom line jeopardized, the difference between a business license and an annual report, which is a question and something that creates confusion to a lot of clients that we speak with, and then the reason to outsource your annual reports to CSC and the benefits our clients currently see for utilizing CSC to handle these annual report filings.

Without any further ado, let's just into the first topic. Lauren, could you talk to our audience today and tell them a little bit about what is an annual report?


Lauren: Sure, Scott, thank you. An annual report is a requirement that a Secretary of State requires every single entity to file. Different states can call it by different names. For example, California calls the annual report a "Statement of Information," while Nebraska actually calls the annual report an "Occupational Tax Return." Delaware is nice, it calls it a "Franchise Tax Report," and then other states can call it an "Annual List" as well.


Scott: Excellent. Yeah, that sounds very confusing, especially when you start throwing in the term "tax." I know everyone always kinds of gets up in arms and starts sending things over to a different department, but really, states are calling it a tax when there's not really much of a tax involved?


Lauren: Correct. Occupational Tax Return for Nebraska is just an annual report. They are only asking for officers and directors. They actually require no financial information.


Scott: Wow, so that can definitely create some confusion with a client and I know it's something that often is a point of interest when I speak to a client.

Now, outside of having these various names, as mentioned, when are they due? I mean, all they all due on the same date? Does it matter if you're an LLC, a corporation? Do these type of things matter?


Lauren: It does. If they were all due on the same date, I don't think we ever would sleep on our team. Luckily they are spread out around the year. Some jurisdictions have them based on their fiscal year end, for example, Alabama. The business privileged tax return is due three and a half months after your fiscal year ends.

And then some states have anniversary months. Colorado, for example, you file the day you actually register to do business. Then in Illinois you file your annual report the last day before your anniversary month. So if you register to do business in December, you have to file your annual report the last day of November. Then some states just pick a day. Connecticut just updated their system and they have all their LLCs are due on March 15th.


Scott: Well, that certainly makes things very confusing. I mean, it's bad enough that you have 50 different jurisdictions, depending on if you're foreign or domestic, and then they throw in things such as having these different due dates.

Now, I know something that happens from time to time is a client will miss an annual report and go into a negative status. Can this also affect their due date?


Lauren: It can. For Colorado, if you go to negative status and you file a correction to bring you back into good standing, that changes your qualification date effectively for them and your annual report will then be due on that date. So you could essentially change it six months later.


Scott: Wow, this is one of those times it probably benefits a client utilizing CSC so we can help keep track of those dates when those come up.


Lauren: It definitely does. Our system is built with the knowledge that we track these dates, we know they're coming, so all of our annual reports are automatically uploaded into our system to file on time.


Scott: If you're out there hoping that someone else is out there managing it, you are possibly putting yourself at risk for missing an annual report. Now, when you miss an annual report, is it just a simple filing that makes everything better or is it a lot worse of a problem than that?


Lauren: It depends on the state, honestly. A good example is Illinois. So you have five and a half months to file your report, so if you are one day late, they count that as a month, actually. So if the next day you're late, you're a month late. You have five and a half months and then they revoke you. In that timeframe you can accrue late fees and additional penalties, depending on the financials.

Now, as I said, you have five and a half months until you're revoked, well, that's they revoke you on a Saturday. The second Saturday of the month is when they revoke you, so you have no kind of chance to plead your case with the state because no one is there.


Scott: You've got to hope that by Monday morning you still are remembering that you owe that state, because I'm sure no one comes into any emails on a Monday.


Lauren: Nope. The state does not send you any reminders. You get one form that says your report is due on this date. Actually, it says, "prior to," so some people think that is the actual due date but you are due prior to that first of the month. And then states like Wyoming, it can be over $10,000 and I've seen it actually go higher, again, depending on your financials, if you let it lapse. That's a really high number to pay if you just miss a report for one year.


Scott: Now, I recently had a client who had an issue in New Jersey. They had missed their annual report filing, they had some big transactions coming up that involved the entity that had missed the annual report filing. Now, they thought they could easily call the state of New Jersey and get back into good standing. It wasn't that easy. I believe you were able to help and kind of do some of the research on that.


Lauren: Yep, definitely. With New Jersey, to get back into good standing, the state actually requires you to have a tax clearance from the Department of Revenue. So I've seen it take up to maybe two, three years to get from them. This can be a very challenging tax clearance to get from the states.


Scott: Wow, and that means that you can't transact business, you could possibly not be able to renew licenses.


Lauren: Correct, and Missouri is the same way. Missouri requires you to have a tax clearance from the Department of Revenue.


Scott: Once you start throwing in all these other things, it makes it very important that you're not missing any of these annual reports out there. Two of the issues that can happen when your annuals reports are due, we talked about the ideas of financial issues that can be created. But that's not the end of the potential outcomes of consequences that could happen if you miss an annual report. Could you talk in a little bit of detail about some of the other issues that companies could face?


Lauren: Definitely. I think probably the main thing would be revocation. Again, no one wants to have their company go into a negative status. Anyone can search for your entity on the Secretary of State website and find that it's negative. Loss of name is a big one too. In Utah, if you go into negative status and maybe you didn't know that for a year or so, someone could actually register your name and you would lose your business name. So just because you were not paying attention for a year, you might have lost your name.

You also can't get a certificate of good standing. So if you're trying to file a publication in another state to grow your business but your home state is not in good standing, you're not going to get a certificate.


Scott: So it sounds like a lot of the hard work that companies do throughout the year to make sure that their revenue is able to continue to go up, that their name is a well-respected name and that they're able to grow their business and thus help out everyone involved in their company, these are all things that can go from just missing what a lot of companies consider one little easy report, which is shocking. I know most marketing departments would hate to see the loss of a name, especially because of the money that they spend.


Lauren: Most people don't know how important an annual report actually is to their business and to keep that good standing.


Scott: Very good point. Now, another thing that we hear is annual reports, yes, it's something we see in all 51 U.S. jurisdictions, meaning the 50 states, the District of Columbia, however, territories and the provinces in Canada also have these types of filings. Is that true?


Lauren: Correct. That is true.


Scott: Now, is this something CSC can also assist with?


Lauren: We definitely can. CSC can assist you with filing your reports in Canada, Puerto Rico, Guam, U.S. Virgin Islands. We can help you with those forms and getting them to the correct provinces to get them filed on time.


Scott: Now, would you say that the U.S. territories and Canadian entities are more difficult to file or easier to file than domestic states?


Lauren: The Canadian entities are definitely much more challenging to file just because they have different due dates, they can vary. I've seen provinces change their due date from March 1st to June 1st just because they wanted to update it. And then also, they're not really telling people. So you might be able to file it on time or you might go to file it online and you can't get it. So we have a point of contact that can help you kind of walk through those scary international filings.


Scott: Oh, wow. Now, international filings in general can be scary. I know we talk to a lot of clients that are not only doing business in the territories and in Canada, however they also go outside those borders and they start going to Europe, South America, and countries like that. While I know our annual report team itself does not handle those filings?


Lauren: Correct, because they're not actually considered annual reports.


Scott: That's right. They're a lot more detailed when you get outside the U.S., but the good news is CSC does have the expertise and we do have a team capable of helping with any type of international filings outside of the territories, Canada and the U.S. We have a team which we refer to as our global subsidiary management team. Not only will they provide workable translations, which can definitely be an issue for some clients, if it's a country where it is maybe not their natural language, we do provide those workable translations so they know what has been submitted, but we really simplify, streamline the management of those filings, especially when it comes to officers, directors. And if anyone here has questions about those, certainly let us know and we can set up a conversation with one of our specialists to talk about our international capabilities.

Moving on to another thing that is typically very confusing subject for clients, what is the difference between my annual report filing and my business license filing? Are they the same? Do I have to have both? What kind of light can you shed on that?


Lauren: They are different. An annual report, actually, is filed at the Secretary of State level only, while your license can be filed at the state, the county, the town, those kind of different levels. Annual report requirements are a little bit different. We might need your officer/directors or your member and managers, while licensing may just need a payment or just some kind of form signed by an officer. A good way to kind of tell is if you see a Secretary of State filing versus a Department of Health or Department of Insurance, that's kind of your good indication that that Department of Insurance is definitely going to be your business license, while the Secretary of State filing will be your annual report.


Scott: I know that another good indicator can be the jurisdictional level, because as you mentioned, annual reports are due with the Secretary of State, where you might be doing business in a California city and they might have their own requirements. I know Delaware, each county has their own business license requirement if you're in there. Luckily in Delaware we just have the three counties for those familiar with Delaware.

But, again, good news, while the annual report team can not help specifically with the business licenses, we do offer services to help manage those. Very similar process. There's a specialist who would be able to help you maintain those licenses. Whether you're in the insurance field, the construction field, the pharmaceutical field, it doesn't matter, CSC is here to assist.

Just like with the annual reports where we don't shy away from the difficult filings, the business license stuff, they don't scare us either. So whatever our clients' needs are, we certainly strive to find a way to help them.

Now, speaking of that, when it comes to the next portion, asking, "Hey, can CSC help me with these filings?" and more importantly, "Why should CSC help me with these filings?" can you talk about some of the difficulties and reasons that you often hear from clients of why they're glad they utilize CSC?


Lauren: Yes, of course. A lot of times I hear from clients that, "I wasn't told this filing was coming due." A lot of times they assume that you are on top of your knowledge and your game, honestly, and you should know when the report is going to be due. So as the annual report specialists, again, our system has our knowledge base built in and our reports are automatically uploaded into our system.

There's never any need to worry about changing due dates and requirements. So if you were using that spreadsheet and you had your Connecticut LLC report was due in July or August and your report actually is now due in March, you're no longer going to have that late fee. The CSC will have that order already uploaded to our system and we'll file it for you.

By having us file your reports as well, you're going to avoid paying those reinstatement fees and penalties or any kind of late interest due to those missed filings. Examples, Delaware actually charges a 1.5 interest on your tax payment for every month you are late. So not only do you get a late fee, you get an interest on every single month.

Something that's a good time saver, you have one point of contact. We're going to help you. We are annual report specialists. We really know our field and we're here to help you and kind of help you navigate your way through this scary requirement land.


Scott: That is definitely good to know that the CSC can help and that we can definitely assist in there. Now, I know that there's some additional benefits of utilizing CSC. If a client or someone on our webinar today wanted to move forward and have CSC handle their funds, what type of service and what can they expect from the get go?


Lauren: From the get go, we're going to give them an audit. I like to call it a corporate health check. It's going to provide the location your company's registered in. It's going to provide if it's active or not active, if you have a report coming due, if you may have one past due. We're going to have that up there for you. We also have entity management, so we upload your data into our system. Once you sign up for the service, you can actually access it and see your officers and directors. You can pull reports if you need to.

Then like I said before, if we find out in your audit that anything is not in good standing, we can bring it back to good standing right away. So we usually see that and file that report almost instantly just so we're not going to have any additional late fees or any chance of going revoked, if it is that five and a half months in Illinois, that you're going to get an active on Saturday.


Scott: That's good to know and having that one point of contact is definitely huge because I know when speaking with a lot of clients, that often there's turnover at their own company. So having the know-how, that CSCs here, and not having to train someone, that's got to be huge for a company because training costs alone can sometimes be huge.


Lauren: You have someone you can trust to go right to it and you know they're going to handle it for you. We file all things about 30 to 45 days in advance, so it makes the process very seamless.


Scott: Excellent. Then also I know that CSC, some of the other benefits of utilizing us and when I see clients and some of their favorite aspects of our services has to do with the fact that they always have access to the forms we file. We don't do the filings and then just leave them in kind of limbo, wondering what's happened, what we've done. We're constantly updating it to let our clients know where we are in our process. Plus, we're storing copies of the filings within the CSCNavigatorunderneath the appropriate entity.

We also have the CSC Good Standing Calendar, which is integrated so that if for some reason—and this is actually available for all clients—they go out of good standing with a CSC entity, and they're either using CSC for registered agent service, they would get notified. Obviously with CSC handing in their reports, they will constantly be in good standing because that's what we're going to be able to provide for them, that nice surety.

And then also we're going to store all those documents I mentioned in the CSC Dashboard. They're going to be able to pull reports on their entity status. If they go to us and they say, "Hey, CSC, we're going to have you handle it," down the line they get sold and maybe they need to present a copy of their entities and their statuses to their acquiring company, they can easily pull that report. Plus, as you mentioned, there's going to be a dedicated team to provide them with everything they're going to need to know and email updates.

What's the important part about the email updates? What kind of assurance does that provide them?


Lauren: Email updates are really good. Your annual report specialist will reach out to you if they need any information, so we'll send you a monthly calendar. It's an Excel spreadsheet and it's going to have every entity we're filing on your behalf that month. And if we require any additional information, we will have it outlined as well for you so you know that we are going to be filing it for you and, again, this is a seamless process.


Scott: Excellent. Well, those are definitely some important things of knowing about what CSC can provide. Now, when I work with a lot of our clients and I work with, as Anu had mentioned at the start, clients who are startup companies with small resources to Fortune 500 companies with major resources, and it doesn't matter the size of company because, really, all companies can ask themselves six important questions, I feel, to determine whether or not they need to possibly utilize CSC and take our partnership to a point where they can maximize it.

Some of these questions, and I want to just kind of pose these to the group in a way that, you know, you can start asking yourself internally if this is something that might be right for you. First, what assurance does your current annual report process offer your organization? One of the things I constantly hear from clients is, "We've got it. I know we have it. Bob or Linda who handles the annual reports, she's going to take care of them. We're great." And I'm sure that Bob and Linda are fantastic employees and would never miss a filing.

However, if they were to miss a filing, that money still comes out of the company's bottom line. What kind of assurance do they have with CSC?


Lauren: They're going to take care of it. Like I said before, we file 30 to 45 business days in advance, we will advance the fees for you and we're going to file your reports. You honestly don't have to really worry about anything when you have CSC filing them for you.


Scott: Excellent. Plus, if for some reason we were to miss the filing, and CSC, we would take full responsibility for that. Not that it would happen, but it's another piece of added assurance to our clients to know that they can plan, and this kind of goes into the second idea of what is your company's budget for fees, penalties or other losses associated with missing a filing? Do you have a "get out of jail free" card? Do you have this idea of we're going to put some money aside when we expect to get these penalties? No, no company does. That would be silly.

But what you could do is you could budget to utilize CSC. That way, you have a known expense, a known cost, and when it comes to those kinds of costs, we don't charge by the hour. They always know exactly what they're going to be charged.


Lauren: Correct. We advance the fees for you and then we list the invoice for the state fees as well as our CSC service fee.


Scott: And do they have only one invoicing option or do they have multiple?


Lauren: Well, there's a lot of them. We can go into that a little bit later on but there's a lot of options for invoicing.


Scott: Excellent. Then the third question a lot of clients will say is what is the process for transitioning the annual report filings when the current person changes roles?

Now, Lauren did a great job of mentioning the process that's transitioning over to CSC. Now internally, and this is often the time that people reach out to CSC. A lot of clients will say, "You know, this person had been filing their annual reports for 10, 15 years, they had their own process. I don't know what it was but I need CSC to help me now." That's great. We can definitely help out.

But why wait until that time happens? Why not alleviate that person from that one responsibility, opening up their time to do something to help maximize the bottom line at your company and not put yourself at risk and not have to worry about what to do?

From your experience, Lauren, do you see that we always deal with the same person at every company? Is it always the controller, always the general counsel or paralegal?


Lauren: Definitely not. We have a lot of people who respond with us. We have some that are office managers. It could be a paralegal. I've had company CFOs before as my contact, so it really is anybody.


Scott: The annual report is kind of a catchall. No one goes to college to learn how to file annual reports. Companies don't specifically hire a person for annual reports. Now, if you wanted to do that, you could hire someone, it would be someone here at CSC. By utilizing CSC, you not only get the breadth of our knowledge, but you have a dedicated contact and you have the ability to know that it's being handled by the same person. We handle any training forever. If there is any kind of change, we make sure, we have an expert trainer on our annual report team so I know everyone is very knowledgeable when they come out.

The other thing is with annual reports, it's not a year-round job for our clients because . . . How many filings do we do in a year?


Lauren: We do over 300,000 filings a year.


Scott: Now, when would you say the majority of those filings occur?


Lauren: The majority of them are due from March 1st to June 1st. Between those few months, we file over 200,000 reports.


Scott: So two-thirds of the filings we do happen within that small window?


Lauren: Yes, sir.


Scott: That's kind of hard to plan a person's schedule if you were to hire someone off the street into your company to handle just the annual reports. Plus, as mentioned earlier, the dates are all over the place.

Now, the other questions that you want to ask yourself as a company is what is your backup plan to file a report on time if the state's website goes down? How reliable would you call a Secretary of State's website?


Lauren: Not at all. They are not reliable. The states assume you know when your due dates are and they anticipate you filing the reports prior to that due date. Georgia is a prime example. We have known this every single year, their website goes down. You might have a month prior, you might have a few days prior to see it, but every single year the system goes down. We have found that if we come in at 6 a.m. to file a report it might work. If you try it after hours it might work, but they offer no, "It's okay, we'll take that fee back." If you are late because their website's down, you are charged that late fee.


Scott: As you mentioned earlier, they say it's "due by." If you do have the ability, do file those early. Now, kind of on the same subject of websites, another question to ask yourself, think about how many pieces of mail your company gets in. How do you keep track of the PINs that the states send out via postcard? Standard postcard just like you would get if you're on vacation and send home maybe. I don't know if people still do that anymore.

If you're getting a small piece of mail, which I lose that in my own house. I would lose that in my own house if it got sent. If I'm a major company getting hundreds of pieces and I lose that, what are my options?


Lauren: Your options are to call the state and beg for the information you need. Once you sign up for the annual report service, all of your compliance mail goes to the annual report team. So anything that comes from the state, any kind of reminders, Michigan just updated their systems this year, brand new. They're sending out little orange postcards with your CID and your PIN, so it's just some not sign and numbers that you have. You have to have this to file your report, though. The state is very busy because it is their due date time, so if you email the state or you call them, they might get back to you in six weeks. Again, if your report is due in a month or two weeks, you're going to miss that due date.

CSC has received all these PINs and we keep track of them. That way, we can file the reports, again, in advance for you.


Scott: That's definitely something troubling that would be to an organization if you find out that you're filing on the last few days and you don't have that number. Now, what's the significance of the PINs? Why are states going to that method?


Lauren: They're doing that to make sure we're not having any fraud. They want to do it for security. Nowadays a lot of states, you can sign on and file a report, which is kind of a scary situation. A lot of states are going this way. They're out, going to the PIN section to make sure that no fraud is going to happen. Privacy's obviously a huge thing in the internet these days so we want to make sure that we're keeping our client's information secure and safe.


Scott: Definitely. The last question that I always ask clients when they're making the decision of whether or not they need to utilize CSC for filing the annual reports is how are they managing and keeping track of the evidence of the filing? Some people file it and kind of like a village, assume everything goes to plan. Unfortunately, that's not how it always works. Sometimes someone at the Secretary of State mis-keys in their information, gives their annual report credit to someone else and now they go out of good standing and if they're in New Jersey, they have to go through that whole process.

If someone has CSC handle their annual report and something like that were to happen, will we intervene and get that taken care of for them?


Lauren: Yep. We'd have that corrected right away. A lot of states also send evidence via email so if maybe Bob's out of the office for a vacation and he got that email with the evidence, he might have deleted it by accident. An example is Nevada. You have 30 days to get your evidence from the website or it's gone and you have to pay a hefty fee to actually get a copy of it.

If you have CSC file your reports, we know this, we know these things going in so we file your report and we're going to grab it the next day.


Scott: That's definitely good information. I would, again, ask everyone on the line to take these questions and really consider them to their own organization, their own style of how they're handling the filings.

With that, I'm going to hand it back over to Anu to speak.


Anu: Great. So that is all the time we have today. As a reminder, if you'd like to be contacted by a CSC specialist to review your specific needs, please select the option on your screen. If we didn't get to your question, we will contact you with a response after the webinar. Thank you again to our presenters and thank you to everyone who joined us. We hope to see you next time.