Limited Liability Company’s (LLCs) are a popular business entity that allows owners to separate themselves from the business. This means if the business is sued or goes bankrupt, the owners’ personal assets are protected. Forming an LLC also provides protection from negligent co-workers and employees.
The benefits of forming an LLC are many – from management and taxation flexibility to personal liability protection. However, to reap these benefits and more, there are certain requirements of LLCs, one being filing an Annual Report. Without an Annual Report, your LLC faces noncompliance with the state, and you’re left without protection, and possibly, without a business.
Let’s look at how you write an Annual Report for an LLC and what information is required.
What is an LLC Annual Report?
An Annual Report is a yearly filing from an LLC that includes details of all activities that occurred within the previous year. Depending on the state, this filing may be required every other year, therefore, you would need to include activities from the previous two years.
The Annual Report also has a variety of names depending on the state - annual statement, statement of information, periodic report, biennial statement, or decennial report.
The purpose of Annual Reports is to ensure you stay in good standing with the state. They provide information to the state and government regarding all persons involved in the company, as well as the registered agent, managing members, and address of all.
Information Included in the Annual Report
Annual Reports are simplistic and don’t require a lot of information, however the details can become tedious. Correct paperwork and information are essential when filing an Annual Report. Failing to provide the necessary information required by law can cost you your business license or may result in a hefty fine.
Below is the information you want to ensure is included in your LLC Annual Report.
Name of Business: It’s important to have this in written form so that there are no mistakes or misunderstandings.
Place of Business Address: This should be the residence your business lists as it’s physical location. It can also be your registered agent's address.
Business ID Numbers: In addition to the name and address of your business, it’s best to include the EIN given to your LLC by the IRS.
Registered Agent Information: The name and contact information for your registered agent is essential. This is the person who legally accepts notices and other important documents on behalf of the LLC.
Managers/Members: The managers or members of an LLC are those who own part of the business and who are in charge of the day-to-day activities. You will need to have their names and addresses included in the annual report. It’s also important to list whether the LLC is member-managed or manager-managed.
Purpose of Business: The purpose of the business is usually the products you sell or the services you provide.
Shares issued by the company: List in the Annual Report how you wish for shares to be divided among members, and how you want your members to divide the profits.
How to file an Annual Report?
After obtaining the required information for your Annual Report, you can submit it one of two ways – online or by mail. Regardless of how you plan to file, it’s best to keep a copy for your personal records.
When submitting the Annual Report, you will also submit the required fee, which ranges from $10 a year to over $800. This fee depends on the state and your unique situation. Each state also has a set due date for filing Annual Reports. For example, some states require filing your Annual Report on the anniversary date of formation. Other states have specific dates based on various factors. You can find your filing date on your state’s website.
What Happens if you don’t file an annual Report?
Like all required documents for an LLC, there are penalties for not filing your Annual Report. The penalties range from late filing fees to dissolution, depending on how long your LLC stays in noncompliance with that state.
If dissolution does occur, you will either be given the option to reinstate the company, or the court will rule in favor of permanent dissolution.
If you do not file an Annual Report, your LLC will be charged a late fee. The fee varies by state but is typically around $50. If you continue to ignore filing the report, your LLC will be dissolved, and you will lose any limited liability protections.