An important topic that rarely gets much attention and can fly under the radar is the required business entity report. Most states require this report to be filed on all corporations and LLCs domiciled within their state.
This report is normally filed with the Office of the Secretary of State, but each state varies. Most states require this report to be filed on an annual basis, but a few require the report to be filed every other year. Due dates for the report vary by state. Often, the due date coincides with the beginning of the state’s fiscal year, but not always.
Updating Your Report
Business owners are busy, and this required filing can be overlooked very easily. The problem is compounded when the report is neglected for several years. At some point, the state can administratively dissolve the entity, and legally, it no longer exists. Your entity is no longer in good standing with the state.
This could very well mean the loss of any personal liability protection for the owners and stockholders. Lost is the protection that a corporation or Limited Liability Company provides.
Yes, the state might even continue collecting taxes from your entity even though, in their eyes, it no longer exists. States often accept tax return filings for payroll, sales, income, and franchise taxes from these entities that have been administratively dissolved. But this in no way means you are in good standing with the state. If the required report has not been filed timely, then your entity is not in compliance and can face being administratively dissolved.
What happens if you discover your entity is not in compliance?
Some states allow the reports for previous years to be filed. Likely, there will be some sort of penalty imposed for noncompliance.
Also, there is normally a point where the state will not allow the reports to be caught up and will not reinstate the entity. For some states, it is a five-year limit. Meaning after five years of not filing the report, the state will not allow your entity to be reinstated.
What do you do now?
Each situation is different, and you should immediately consult with your corporate attorney if you have not timely complied with the filing requirement for your state. This can be a complicated situation to resolve and will take some time. It is much better to remember to file the report promptly if you are operating within a state with a reporting requirement. Or have someone such as your income tax preparer or corporate attorney file the report. This is all part of the rewards of owning your own business.
