Why You Don’t Want to Miss Your Annual Report Deadline
By Sherly Ramirez
In the United States, the construction industry is stringently regulated by local, state and federal authorities and additional tax regulations come into play for entrepreneurs who elect to form a corporation, partnership or other formal business entity rather than operate as sole proprietors.
For instance, all 50 states require corporations and partnerships to file an annual report stating the legal name of their business, its federal employer identification number and contact information for at least one principle and a registered agent, which is often a company officer or an outside attorney.
Requirements, agencies and filing deadlines vary from state to state. For instance, some states regulate corporations through their Department of State, while others do so through a department or division of corporations. Either way, all states require business entities to file reports annually to remain in good standing with state regulatory agencies regardless of whether an entity’s information has changed. In most states, this can be done online.
If your business entity fails to file an annual report by the deadline specified, your state will simply assume it has been dissolved. That may not seem like that big of a risk, but it could come back to haunt you in a dispute, since one of the first things lawyers, regulators and tax authorities check when investigating a business is their annual report. The absence of an active annual report immediately signals that you are not operating your business in compliance with the law.
While dissolved or administratively revoked corporations may be reincorporated, it will be necessary to file a request for reincorporation and pay off all the related fees (Reincorporation Fees + Owed annual report Fees) owed at the time of the request.
For this reason, states generally don’t require you to file any notice when you’ve closed a business entity. You simply stop filing your annual reports.
Ignorance is no defense
All this can be a little confusing, particularly to recent immigrants unfamiliar with the more formal nature of U.S. business practices and laws.
I have had some clients in my office that don’t even know what business structure they have, let alone what they are supposed to do. I ask them “Didn’t the person who incorporated the company for you explain it to you?” The answer I get from 80 per cent is “No,” while the remaining 20 per cent say “Yes, but I didn’t understand anything.” If you are part of that 20 percent, ask again and remember your obligations under state law.
I know the world of accounting, taxes and finances may be daunting. That’s why I always suggest my clients get a team of professionals to work with them. Even if they aren’t your employees, you can rely on them to explain how things should be done.
It should be noted that American laws are corrective, not preventive in nature. That means there won’t be anyone knocking at your door to tell you “Look. You’re doing it wrong. Get it right.” On the contrary, they will say “This is wrong. Therefore, you will have to pay this much in fees and penalties.”
That’s because the law clearly states how things should be done.
If your company is audited, tax authorities will check your annual report. If something is amiss, you will be subject to a fine and penalties.
Below is a list of the links used by some states where you can file your annual report. Unfortunately, not all states make this information available in Spanish:
Sherly Ramirez is the owner of SR Accountant Services, a tax and accounting consultancy firm specializing in the construction industry. You can connect with her on her social media channels. You can find her as SR Accountant Services on Instagram, Facebook, Twitter or LinkedIn, or visit www.sraspro.com. You can also send her an email at email@example.com