No matter which state you do business in, that state’s government is going to need to ensure that your LLC remains compliant with state laws and regulations. Some states require that, when you form an LLC, you provide them with financial information each year, reflecting the fees and taxes associated with your business, while others like Pennsylvania may ask for one every 10 years. California is a biennial state, requiring you to do this every other year. Having a consistent annual report can also reassure current investors and shareholders about the benefits and asset protection your LLC offers, help your business attract new investors, or provide information and insight to your business analysts and creditors. This process involves understanding the requirements, including drafting an operating agreement for both single member LLC and anonymous LLC setups, and underscores the importance of conducting a thorough search to ensure compliance and strategic planning.
An annual report is a legal document containing comprehensive financial information about companies, corporations, and non-profit organizations. Whether you are working as a corporation or an LLC, the state you do business in is going to need to receive updates about your company including changes in ownership or business location. In California, it’s referred to as the Statement of Information, and it is required to submit it upon creation of the company, as well as biennially (every other year) for LLCs. This report will contain information about the financial performance and activities within the past two years of operation.
Every company will have certain required checkboxes when being formed, and a Statement of Information will need to update these details when reporting to the state. They aren’t too complex, but the information is vital to get right to stay in good standing. In the event of a huge business or management shift, it’s important for a state to know who or what has changed. Here are some of the basic things to include in a report:
Having this written down makes it clear which business is being represented. This is matched with your business ID numbers which should also be included.
It’s important to reaffirm whether the LLC is member-managed or manager-managed. The people who own part of the business or are in charge of day-to-day activities should have their names and addresses included as well.
Providing the Employer Identification Number assigned to your LLC by the IRS will also help verify the business. You can find your EIN number on your IRS confirmation letter, tax returns, loan applications, or you can just call up the IRS and look up your federal tax ID number.
The state you do business in is going to want to know who to contact with legal information and this is your guy. In California, they are known as your agent for service of process. If your registered agent ever changes or can no longer accept documents on your behalf, you will need to fill this role as soon as possible and update your statement of information accordingly. Failure to have a registered agent can lead to your business being dissolved.
This is the physical location of your business. Alternatively for privacy protection, this can be the address of your registered agent. Make sure you know which address is listed, as this is where report reminders will be mailed from the Secretary of State.
A business purpose is generally what products are sold, or the service provided to customers. It describes the reasons or purposes that a company was founded initially. It’s different from a mission statement and is generally much more direct with the intention.
You should list in your report how shares are divided among members or how the profits are split. It’s good to reconsider this as members invest more into the LLC.
If your LLC contains multiple members or investors, then including a report on the current economic status and the yearly highlights will keep everyone involved with the business in the loop. This can also contain information on new products, goals, future needs, as well as the direction the company is heading towards.
Restating your core values, mission statement, and future objectives reaffirms the goals of your company. This should also be considered, should your values or objectives change over time.
There are two ways to file your Statement of Information. Once you’ve collected all the information required, either apply online using the Secretary of State’s website, or write the form and submit it in person, or mail it to the Secretary of State Business Programs Division. Keep a copy for your personal records, regardless of how you decide to file.
The standard fee for filing a California Statement of Information is $20 for LLCs when filing initially, and $20 every two years when your biennial report is due. In the event your agent for service of process changes, there is no cost when updating your information.
There are several potential consequences should you fail to file your statement of information. The fee for profit entities is $250 and you risk suspension. If suspended, your LLC will lose the ability to do business legally, be unable to sell, transfer, or exchange property, file claims for refunds, maintain an appeal before the Office of Tax Appeals, and you lose the right to your business name and may lose it.
If you continue failing to file the report, your business might be entirely dissolved, and you lose all the limited liability protections that come with it. The notice to renew is typically mailed to whichever business address is listed. This typically might be the address of your registered agent. It’s important to know where this reminder will be sent, in order to prevent the harsh penalties that come with failing to update your Statement of Information. Setting a reminder on a calendar is advised, since it is the responsibility of your business to update these forms.
If you’re having difficulties keeping up with the requirements involved with updating your LLC’s statement of information, then a business lawyer will have the answers you need. Contact us, and we can help you figure out what you need to keep your business in good standing.