Getting Ahead of Annual Report Season: Best Practices and Key Considerations

Annie: Hello, everyone, and welcome to today's webinar, "Getting Ahead of Annual Report Season: Best Practices and Key Considerations." My name is Annie Triboletti. I will be your moderator kicking things off today.

So joining us for our webinar are Trent Bavaro and Amanda Hughey. Trent is a director of product management, focusing on annual reports, and Amanda is a senior client services representative. So with that, I would like to welcome in Trent and Amanda.

Trent: Thank you, everyone, for joining us today. We appreciate you taking time out of your day to listen in.

To start off, we like to share a little bit about who we are and why you can be assured that what you hear from us today will be helpful and accurate information on the topic of annual reports. Corporation Service Company or CSC is a global provider of corporate compliance and business services. We have over 8,000 employees, with staff on 5 continents and the ability to service our clients in more than 140 international jurisdictions. We're privately owned, under common ownership for more than 125 years, and are a trusted partner for more than 90% of the Fortune 500.

We are talking today about annual reports, primarily focused on the U.S. and its territories. But we also provide similar services on a global scale, along with a leading entity management platform for you to view and track all of your organization's entity data. Beyond traditional U.S. compliance services, we have leading digital brand services, including enterprise-level domain registration and security monitoring. eRecording, lien and UCC filings, and fund administration are just a few of the tangential business services we provide. If there's anything you need, we are here for you.

Now moving on to the agenda for today, we have a lot on it, and we will do our best to make the greatest use of our time together. The first thing we're going to talk about is what is an annual report. That's why we are here today. We are talking about a state-level entity filing obligation to maintain the status of your company in any jurisdiction that you are doing business.

We're also going to go into filing and reporting deadlines and requirements. Different entities and different states have different filing requirements, different filing cadences, different information that needs to be included on those filings. Just an example, in California, if you are a corporation, you file your annual report every year. If you're a limited liability company, you follow every other year. So even in the same jurisdiction, there are going to be nuances and differences.

And going on, annual report challenges, that's one I just mentioned right there. There are other important challenges as well in terms of the information that is needed, how often filings are done, what information is included, amongst other things.

What are the consequences of not filing an annual report? Well, the main thing is to maintain the status in the jurisdiction that you're registered to do business in to stay in good standing. That is the primary purpose of the annual report. But there are also other consequences, penalties, fees, and reputational damages. There's a lot that goes into filing an annual report and a lot of reasons why it is important to make sure that you timely file and with the correct information.

We're also going to talk about business licenses versus annual reports. What is similar? What is different? A lot of times we see those in the same sentence or same conversation, but there are a lot of distinct differences, and we'll explain what those are, too.

We'll also talk about 2027 insights. It's already almost the end of the year. We're going into 2027 and what to expect next. Last year, we talked about a new nature of business filing requirement for Delaware corporations. We're going talk about some other changes that are happening in the landscape going into 2027.

And lastly, we're going to talk about how CSC can help you with your annual report filing needs. And with that, I will pass it over to Amanda on what is an annual report.

Amanda: Thank you, Trent. An annual report is a recurring filing that many businesses must submit to stay in good standing with the state or other jurisdictions where they are registered. The name can vary depending on location. You may hear it be called a statement of information, an annual list, a franchise tax report, occupational tax report, but the purpose is usually similar, to keep the government updated on key company details and to satisfy a compliance requirement.

Now if a company misses the deadline, it can face penalties, late fees, loss of good standing, or even in serious cases, administrative dissolution or revocation. So the main key takeaway here is annual reports may sound routine, but they're very important because they help keep a company legally active and in compliance.

So now we're moving on to the annual report due dates. When are they due? So the due dates are not uniform. They vary by jurisdiction. In some states, the filing is tied to a company's fiscal year end. In others, it's due during the anniversary month or a specific anniversary date of the formation or registration. And then there are some jurisdictions who just set their own annual due date, regardless of when the entity was formed. But there's one important thing to remember is that these requirements can also vary by entity. For example, corporations, LLCs, and foreign entities may each have different filing rules or deadlines, even within the same state.

So a key takeaway here is you can't assume one annual report deadline applies everywhere. Each entity has to be carefully reviewed based on its jurisdiction, its entity type, and its filing history.

So now what are the challenges of managing annual reports? It can be a little bit more complicated than it looks. So here are four common challenges.

First is just staying on top of the due dates. As we discussed, deadlines vary by the jurisdiction, the entity type, and the state's own rulings. So tracking them accurately is very crucial.

The second is knowledge of the filing requirement. It's not just about when to file. It's about understanding where to file, how to file, and what information each jurisdiction expects.

Then it's managing the relevant data. Annual reports often require current details, such as business addresses, officers, directors, managers, the registered agent, ownership information. If that data isn't centralized and up to date, filings can become time consuming and error prone.

And then the fourth is the actual time commitment associated with the filings. Even a routine report can take a lot of coordination across entities, especially for organizations with large portfolios or multiple jurisdictions.

Trent: Annual reports are not the only recurring filing obligation that a business may have in any state or jurisdiction they are registered in. Sometimes a company will have a registered DBA name, also called a fictitious name, assumed name, trade name, or alternate name that allows them to conduct business using a name other than their true legal entity name. For example, ABC LLC formed to operate a restaurant can project themselves out to the public as restaurant ABC. And that's what they can use on their menu and their signs, and that is if they file that DBA name wherever they are operating their restaurant.

Now similar to an annual report filing requirement, a DBA name registration does not last indefinitely, and instead will need to be renewed at certain frequencies. Again, it depends on where it is registered.

Now one of the complexities of a DBA name registration, similar to annual reports, is that each state has its own requirements. Some states allow registration at the state level, meaning one registration covers the use of that name anywhere in the state, while other states require a registration at the local or county level, oftentimes based on a physical address of a business. In California, for example, I've seen a company having to register the same name in multiple counties within the same state at each of their business locations.

Now CSC offers a DBA name filing and renewal service for our clients enrolled in our annual report filing services. We track and file, and all this information is available to you in real time within our online Entity Management platform.

Amanda: Okay, I didn't file my annual report. Now what? If an annual report isn't filed, the consequences can be more serious than people realize. We talked earlier about losing good standing, in some cases being revoked, administratively dissolved. That means that you're no longer able to legally be active in that jurisdiction.

There are also some other practical business consequences. The company can lose its legal name. It can be unable to obtain a certificate of good standing. These are often required for day-to-day business deals. Having trouble bringing or defending a lawsuit. And in some cases, face issues opening or maintaining a bank account.

So missing filings can impair day-to-day operations, lead to penalties, late fees, and can incur interest. So it's not just an administrative task. It's something that can directly affect a company's ability to operate.

Trent: Thanks, Amanda. And these filings, I want to make note that they're due whether or not you have any updated information to provide. It's something that you need to do in order to be compliant in that jurisdiction, to continue operations, and transact lawfully. So it's really important to understand that.

In addition to that, most jurisdictions, it's a matter of public record, the status of your company. You could go online to the state's website. Basic entity details are available, whether or not you file, whether you're late. That can all be viewed online free of charge on most state websites. So very important, not just for your business operations, but the reputation of your company as well.

And a lot of our focus so far has been the 50 U.S. states and the District of Columbia in mind, but there are also these types of annual report filing requirements outside those jurisdictions and outside the country. Even within the U.S. territories, Guam, Northern Mariana Islands, Puerto Rico, USVI, they all have a similar annual filing requirement. Outside the U.S., we often see that there are additional requirements and that penalties can be even more severe and the fines higher.

Canadian reports have a lot of similarities to U.S. jurisdictions in terms of frequency, in terms of what information is required, how often they're filed, but we do still see differences. And one of the main ones that I often see is whether or not, not just the entity type being different, a corporation or a limited liability company, not just the jurisdiction or in this case province or territory, but whether the entity is domestic or an extra-provincial registration. Extra-provincial registration, that just means that it's formed in one province or territory, and then it's registered in a separate one. So while the same entity type can be in the same jurisdiction, whether it was formed there or registered there from somewhere else could have an impact on what information is required.

And also one of the things that we do see in Canada from time to time, that's different in the U.S., a little bit more complex is that we do see that directors sometimes need to be residents of that jurisdiction. Another obstacle that can be faced is if you're doing business in Quebec, the forms are in French. So another reason to have an experienced partner at your side to help you with these types of filing complexities in Canada.

As you move outside the U.S., again, there are going to be a lot of similarities, but there are going to be more and more differences that you need to be able to understand and to manage. So looking worldwide, a lot of these filings are now going to be tied to financial and the overall health of the business. So not just a regulatory filing that provides core entity information, but actually it needs to provide additional information on the business. And again, as we kind of go more and more outside the U.S., we see steeper fines and more enhanced penalties. At the worldwide level, consequences can be even more severe in terms of higher fines and more difficulty in terms of remediating a missed filing.

Now something else that I mentioned very early on, that I want to talk about in a little bit greater detail, is the difference between a business license and an annual report filing requirement. Now one thing to keep in mind with this is that an annual report is a state-level filing. It is industry and business agnostic. What that means is whether or not your business is formed to do marketing services or operate a restaurant or sell goods or services, it is the same form that is going to be filed with the state. The only thing that is going to dictate what information is needed and what form to use is the jurisdiction and the entity type. Otherwise, it's going to be the same. And that form, that annual report, again, is what's going to keep your company in good standing and maintain the ability to transact business lawfully in that jurisdiction.

Now a business license, while it sometimes can be filed at the state level, it can also be filed at the federal level, county, or city levels. And these are industry-specific licenses a lot of times. So while in an annual report, you might have several hundred different options available across the United States because you have a set number of entities, a set number of jurisdictions, business licenses, we're talking about over 160,000 different types of licenses because there are licenses based off of the type of industry, what you're doing, what you're operating, and again based off of the city, the county, the state, all different types of levels.

So you could have a company with multiple business licenses because you need a food license, a liquor license, different types of operating licenses. Again, all needed based off of every single location where you have that business operating, versus the annual report, again, just going to be the state level. Oftentimes, filed with the secretary of state or the department of state or division of corporations. Business licenses, as I mentioned, can be with like the city of Wilmington or the city of Chicago. Or it could be with different government agencies outside that secretary of state, division of corporations, department of health, department of insurance.

So again, depending on the nature of the business, multiple filings will likely be required for your business license. But the way that the filing process workflow goes is you register your company in that jurisdiction. Once you're registered, then you can kind of drill down at the local level, depending on what your operating, goods or services, and then look to register those licenses, and then renew those at the required frequency as well.

Amanda: So looking ahead in 2027, first, we're going to have more legislation changes. They are coming. So companies should expect ongoing shifts in filing rules and compliance requirements. And that's where CSC stays on top of these. That way, it's one less thing on your plate that you have to do.

Secondly, states are going to continue to change how they handle notifications. And as we're moving more and more digital, this means moving more towards electronic notices. And in some jurisdictions, they're reducing mailed notices altogether. So it makes it even more important to have accurate contact information and a strong internal tracking. And again, that's where CSC can help you. We have our own internal tracking, and we'll show you that in the coming slides.

We're also seeing more legal departments looking to streamline corporate governances by using their registered agent for both annual report filings and for a broader entity management, which can help centralize oversight.

In addition, more states are accepting alternative signature options. This can include electronic signatures. However, some states require the verification page. Other states don't require that. This is another way CSC can help you as a resource.

Now there are also some jurisdiction-specific developments worth watching. For example, California companies now require an authenticated access for corporate filings. And this has been honestly one of the biggest challenges because if your mailing address is not up to date and they send that PIN, nobody is there to receive it. But CSC has been able to assist their annual report customers with getting that address updated, getting that PIN to the right address, and having a smooth process of gaining access. And then also, Delaware, the franchise tax calculations can vary. So it's very important to pay close attention to state-specific rules, rather than just assuming the uniform process.

Another example is Hawaii changed their filing system this year. So there was a delay in Hawaii and creating an account and then moving old documents into the new system. So there are a lot of different jurisdictional-specific developments that are constantly occurring, and we expect to see more of them.

So overall, the annual report compliance is becoming more digital, more state specific, and more dependent on having the right process and visibility in place.

Trent: Thanks, Amanda. And how CSC can help, I feel like we just touched on that just now. And I hope really, at this point, hopefully you have learned something new. And this type of educational content is just one of the ways that CSC can help you. This webinar is meant to be high level, but our team is able to assist with more detailed and specific questions for our enrolled clients.

As mentioned, we provide regulatory updates as soon as they happen, and we make sure that we share this information freely with anyone that is interested. Our webinars are open to the public, and anyone can sign up for updates from our blog.

Now one of the benefits of using CSC is that clients have 24x7 access to CSCNavigator, which is our online platform with tons of tools available in terms of knowledge and filing requirements as well as your entity portfolio. Our good standing calendar, it tracks all registrations and filing deadlines and is fully integrated with our Registered Agent services.

Now a registered agent, if you're unaware, is a statutory requirement in every entity formation and registration in the U.S. It appoints a party to receive documents on its behalf in that jurisdiction, and it has a responsibility to forward it on to the company for responding. Now we offer this Registered Agent service in tandem with our annual report filing services, and it allows us to represent you in every jurisdiction that you're registered in. So you have a single point of contact and customized distribution list so that the appropriate people on your team at your company are made aware of what documents are being received on behalf of your company. And if you're interested in learning more, we do have a related webinar coming up soon that is free to register for.

The information related to services that we provide automatically integrates into our Navigator platform for real-time access to the status of your entities and access to your documents. You can view filed evidence of all documents we have submitted on your behalf. And you can set up custom email reminders to unlimited users. When you partner with CSC, you not only receive access to constantly-evolving technologies, but real people that are here to help you with whatever questions that you have.

Now when you first enroll in our services, we perform an audit of your entire entity portfolio, and we help remediate any filings that need to be completed, that are past due, that have missed the filing deadline. We're going to make sure that your entity profile is currently and completely up to date. You'll be assigned a dedicated annual report representative that has a direct line phone number and email, that'll pick up the phone and speak with a real person at any time that you need help or assistance.

We prepare all the annual report forms. We file the required documents, and we advance jurisdiction fees in most jurisdictions. We handle franchise tax reports when they accompany annual report filings as we mentioned, such as in Delaware, and can help explain different options available that can save you time and in some cases money.

I know we talked about this briefly, but again to call out a little bit more detail, in Delaware, the state calculates the franchise tax owed for corporations based on the authorized shares method. But not everyone knows that you can choose to calculate fees owed based on the assumed par value capital method as well, which could potentially lower your franchise tax obligation that accompanies your annual report for Delaware corporations.

When we file your annual reports, our system automatically updates entity information and filing statuses within our platform and that you are automatically granted access to use this platform, when you are enrolled in our service, where you can track the status of your filings in real time. The accuracy of filing requirements is tied to our Knowledge Base, which is audited and updated daily by its own dedicated team.

And lastly, we offer the option to invoice monthly after services have occurred, which reduces the administrative burden and back-and-forth prior to each of your filings being successfully submitted to the state agency for processing. That way we focus on what is important first, and then we worry about invoicing second.

Now the information related to the services we provide automatically integrates into our CSC Entity Management platform for real-time access to the status of your entities and documents. I did mention this, but the difference here is that Navigator is our total platform that has lots of different tools available to you. Entity Management is focused on your entity data and your entity portfolio.

Now we do provide free and unlimited training and are constantly listening to our clients to customize delivery to meet each company's needs. We're fully GDPR compliant, which are strict EU rules because we are a global company and work with global clients about protecting personal data. We meet the strictest of requirements for all of our clients, which include banks, financial institutions, and other very highly-regulated companies. We also have internal controls to grant different users different permissions within your company. This allows for security permissions within organization and is a standard that CSC follows internally as well.

Within this platform, you can manage deadlines, filing statuses, and other details in the calendar, providing transparency of the status and ownership of the filing process. We also have integrations with client industry-leading applications that promote efficiency and decrease duplicative efforts by having to use multiple systems. You can use our platform as your source of truth across numerous governance and company-related activities.

We also safeguard our clients' critical and confidential data, making sure it remains only available to our clients and available whenever it's needed. Whether that is to manage sensitive ownership information or use it to automatically create organization charts, it is available to you and under your terms.

And back to you, Amanda.

Amanda: Thank you. So the five questions you see here are a really good framework for assessing your annual report process. We've touched base over these in our past slides, but just to kind of touch base again: Are you in good standing? Are all of your entities in each jurisdiction in good standing? Can you handle personnel changes and keeping that up to date with the secretary of state as needed? Do you have any backup plans for when a secretary of state website goes down? Are you actively tracking those due dates effectively? And where are you storing your proof of filings?

These are all questions you need to keep in mind when it comes to making sure your annual reports are filed accurately and on time each year or as they come due. This is where CSC can help you, and you have your dedicated customer service representative, who's right there with you, ensuring that these five questions are always answered.