The Hows and Whys of ANNUAL REPORTS

Did you know that the state could shut down your business if you fail to file one form each year? The good news is that the form is very simple. It takes you less than 10 minutes, but if you forget to do it, the state will dissolve or terminate your company, and it will no longer exist. And this action will throw you into a state of sole proprietorship, which does not protect you from any liability if anyone were to sue you through the acts of your business. 

So what is the form? How can you file it? What do you need to put in it? How can you remember to file it?

What is the form?

I had a company called the LCR LLC, a shell company that I eventually let dissolve.  In this company, as I was figuring out my next steps to start Functional Lawyer, I could track expenses when I was in sales and on a commission basis.

The last event for this company that took place with the state of Florida on the state of Florida's Division of Corporations website was “Administrative Dissolution for Annual Report,” which means the Division of Corporations dissolved the company because I failed to file an Annual Report. Now, I did that on purpose because I was letting that company kind of dwindle and wind up. "Wind up" is the technical term for basically tying up loose ends of a company that no longer exists. So I did this on purpose. However, if you do not want this to happen to you, pay attention. 

Yesterday, when I was on a call with one of my clients, I said, “Okay, you made sure you filed your Annual Report, right?” She said, “What's that?” This is somewhat my fault, but it is in the data materials that we give to our members. I should have done a better job explaining it. People just forget and are busy, not always reading the fine print. So I’m sharing this with you so that you do not make the same mistakes. 

When we went on to her Secretary of State's website, it said her company was terminated. (Different states have different terms for it.) Effectively, if you're not giving them information every year, showing that you are still in existence, available and open for business, by filing the Annual Report, they will shut you down. 

How can you file the Annual Report?

Most states will have a place where you can go to the Division of Corporations website, and then you can e-file your Annual Report.  Most states allow you to file online. Search through the menus and simply click on the appropriate links. It only takes 15 minutes or less. Usually you will pay an annual fee of $50 to $200, though on average they are $120 to $150. 

What do you need to put in the Annual Report?

On my old Annual Report from the LCR, you can see what is in it, and then what you have to verify each time you fill it out. 

In Florida, we search by a document number and that is the ID number the state gave you when you first incorporated, or you can maybe search by your name. Click on the file Annual Report link. All you are doing is verifying that everything is still up-to-date. If it is, you basically just say, “Yep, everything looks good.” You pay the fee and you go back to business. If it is not, you update it.

What could have changed? You could have moved offices if your principal place of business moved, or you could update where you want to get mail. You can also update the Registered Agent.

A Registered Agent, for those of you that don't know, is somebody designated, usually a human, sometimes a corporation, who is designated to accept formal notices on behalf of your company. The reason why we have Registered Agents is so that the state and any attorneys or any creditors, anybody that's looking to serve you with legal notice (most often tax liens, tax information, or lawsuit) knows that whenever they hand it to your agent, you have received it. So the knowledge gets imputed to everybody in the company once that agent has it. You can serve as your own Registered Agent like I did at this company. You also can pay an attorney or a CPA to do it. There are many companies that supply this as their main offering, and the company will just be your Registered Agent, which is totally fine if you trust that company. It doesn't have to be a law firm or a licensed professional. In many states, it can just be anyone over the age of 18.

There are some rules about the Registered Agent having to be at that location for certain hours during the day. Some states require between 10AM and 2PM most days. Some require you to be there more than 50% of the time. It depends on the state. Note that you cannot just say you are a Registered Agent and give an address halfway across the state. You are supposed to be at that location, so someone can hand deliver something to you, and then you can either sign for it, or they can file an affidavit that they handed it to you or somebody like you. So make sure your Registered Agent information is the same and up to date.

Near the end of the report is the Authorized Persons section. The way Florida handles this is they have one place for all Authorized Persons, people who are authorized to act on behalf of the company.  The “Title” by the signature was a member (AMBR) of LLC in my example, so, an authorized member of the company. For those of you who don't know, LLC calls its owners "members." So, in this scenario, I was the only member and the only Authorized Person, and all of my information was correct at the time I filed this annual report.  

I have found that many of you have a spouse who maybe isn't a professional but runs the business side of your office. It's important to note that if you have a professional entity where he or she cannot be a co-owner with you, this is a good place to note that they are an Authorized Person. For example, if they wanted to call the bank on your behalf and are not listed as an account owner, the bank will say, “Who are you?” Then they can show the bank, by just you writing an “AP” for Authorized Person, that they can be a non-owner yet somebody who can act on behalf of the company: managing finances, entering contracts, that sort of thing. 

After all is said and done, you sign, using your title, showing how you are able to sign on behalf of the company, and you date it. 

How can you remember to file it?

If you don't want your company to get dissolved and fall back into a no protection of liability sole proprietorship, then file your Annual Report. When Super Bowl Sunday comes around every year, it is a good time for you to file your Annual Report. As you talk about all the commercials the next day, make that your reminder to file.  If not the Super Bowl, perhaps other notable days, such as Martin Luther King Day in January, or Valentine’s Day or President’s Day in February, will help you remember. Put it on your calendar every year and you will never forget. 

Conclusion

Usually states give you several months to complete, starting around January 1st and ending around April 1st.  By checking with your state on the timing in January or February, you can't go wrong. 

The state should also be sending you reminders either through the mail or through email as well. Check to make sure that the state’s emails are not going to SPAM because they will send you reminders before they dissolve your company.  It is better to not get to that point. So file your Annual Report every year in the first couple months of the year. As always, reach out to Functional Lawyer if you have any questions.