Annual Reports Best Practices: How to Stay in Good Standing

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Caitlin: Hello, everyone, and welcome to today's webinar, "Annual Reports Best Practices: How to Stay in Good Standing." My name is Caitlin Alaburda, and I will be your moderator.

Joining us today are Andrea Jonaitis and Kevin Eissner. Andrea is a senior sales engineer in the Corporate and Legal Solutions Group at CSC. Since joining CSC in 2017, Andrea has specialized in global subsidiary management and entity management, working with prospects to present an accurate and clear scope of services, including helping subsidiaries stay in compliance as well as demonstrating CSC Entity Management. Kevin is a senior customer service representative in the Annual Reports Department at CSC. He's responsible for keeping clients in compliance with all states and some international jurisdictions. And with that, I'd like to welcome Andrea and Kevin.

Kevin: Thank you, Caitlin. Happy to share some good information about annual reports today. Just want to take a moment to formally introduce myself. My name is Kevin Eissner. I am a senior customer service representative here at CSC. I've been with CSC for the past eight years, and I have been working in the Annual Reports Department this whole time. I have been filing these reports. I've been in communication with our customers. I really have a good knowledge of our service and the filing requirements and happy to share that knowledge with all of you today.

Andrea: Hi, everyone. Thanks so much for joining us today. This is Andrea Jonaitis. Kevin and I are excited to have you with us as we dive into our discussion around steps and best practices to help you stay in good standing and to share a little bit about how CSC can assist you with that initiative.

Before we get into our agenda, I want to take a brief moment to talk about who we are as a company. I took a peek at our attendees on the line today, and I see a fair portion of our audience that's currently using CSC and already familiar with us as an organization, but I also see some new names and organizations that don't currently partner with CSC and you might not be familiar with who we are. So I thought it would make sense to take a brief moment to tell you a little bit about who CSC is as an organization for any of you that might not be familiar with us.

This slide includes some high-level statistics about us and some of the markets that we serve. CSC is a global organization with over 8,000 employees in more than 75 locations across 33 countries. We have expertise and we provide services in over 140 jurisdictions around the world. Our global headquarters is in Wilmington, Delaware, which is where we happen to be based out of today. CSC as an organization is privately held, and we're able to trace our roots back all the way to 1899. In fact, we actually just celebrated our 125th anniversary this year.

We are the largest U.S.-owned registered agent, and we're also the largest registered agent by market share. Our registered agent and annual report services may be what CSC is most notably known for, but CSC offers a range of other services and technologies across many diverse areas, including tax, UCC, digital brand services, global entity management and global financial markets, eRecording, and so much more. In fact, over 180,000 corporate legal departments utilize CSC's services and over 90% of the Fortune 500 use CSC for at least one service. We're also proud to say that we protect more than 65% of the 100 Best Global Brands.

I also wanted to take a moment to quickly mention our mission at CSC, and this will hopefully start to come into focus as we go through this presentation today. Our mission is to provide world-class service and offer solutions that integrate the services that we offer along with powerful technology tools. Further on into today's webinar, we're going to bring these concepts together and talk about the services and technologies that we offer pertaining to annual reports that can really help our clients ensure that their entities remain in good standing, and I'll even show you that technology in a live demonstration.

With that said, let's get into today's agenda, which you can see here is pretty jam-packed. We'll start with the basics, defining what an annual report actually is. We want to make sure that everyone is on the same page with the language as we get deeper into some of our content, so we will define that term. We'll also talk about the filing and reporting deadlines and what drives those deadlines and requirements. Those deadlines really can vary from jurisdiction to jurisdiction as can the requirements, so we'll get into that. We'll dig into some of the challenges that we commonly hear from our organizations when it comes to maintaining their good standing compliance and handling annual reports, also what could happen if organizations miss filing deadlines or requirements. We'll talk a little bit about the differences between business licenses and annual reports as there are some critical distinctions there that we want to cover.

We'll also share some insights for 2025 and what we can expect based on current trends and observations. Of course, we're really excited to share with you some of the benefits of partnering with CSC for handling your annual reports and for using CSC for a number of our other compliance services. At the end of our session, we'll have a brief demo of our technology portal to show you how we can keep you informed and organized when managing your compliance requirements.

So really let's start at the beginning here, which is making sure that we're all on the same page with what we mean when referring to or using the term "annual report." So Kevin, as our annual reports expert here at CSC, is going to kick us off by guiding us through that terminology and defining what we mean when we're talking about annual reports.

Kevin: Thank you, Andrea. So first and foremost, what is an annual report? An annual report is a required filing to maintain compliance with the secretary of state's office. So each secretary of state has a similar filing, and an annual report is really the most basic level of entity compliance. Typically, they are just basic reports that ask for basic company information, such as your principal business address, your officers and directors if you're a corporation, or if you're an LLC they ask for your members and managers. Some of these reports also want to know what type of business you are conducting. They refer to that as the business purpose.

Some states ask for a little more than just the officers and addresses. They use the filing as a survey opportunity. West Virginia will ask how many employees you have in total and working in West Virginia, New Jersey asks for the company's workers' compensation policy information.

Fees can also vary greatly from state to state. In California, to file a corporation annual report, it's $20. In Nevada, to file a corporation annual report, it's $650. For Delaware, large corporate filers can be required to pay $250,000 in franchise tax to the Delaware Secretary of State annually.

Below are a few names that certain states call their reports. So in California, it's called the statement of information. That's just a basic filing where you're reporting your CEO, CFO, secretary, and your business purpose and addresses. Nebraska calls their filing the occupational tax report. It's called a tax report because the fee is calculated with some property values. Nevada is the annual list, where you just list your officers and directors. And Delaware is the franchise tax report, where the company's gross assets and shares come into play with the fee calculation.

All right. So now that we know what an annual report is, when are they due? Just like the names of annual reports can vary from jurisdiction to jurisdiction, the due dates also vary greatly from jurisdiction to jurisdiction. Below are some bullet points that show some examples of how due dates are calculated.

One example is a fiscal year end. So in Massachusetts, your annual report is due three and a half months after the close of your fiscal year. So an example would be when your company registers in Massachusetts, you will indicate what fiscal year end you use. So if your company uses a December 31st fiscal year end, your annual report is due March 15th, three and a half months after your close of the fiscal year. Another example of a fiscal year end state is Tennessee. The annual report in Tennessee is due three months after the close of your fiscal year end. So again, if you're using a December 31st fiscal year end, your annual report is due April 1st annually.

In some states, your annual report is due during your anniversary month. So in Wyoming, your annual report is due on the first day of your anniversary month. So if you registered in Wyoming on October 15th, your annual report will be due October 1st annually.

Some states your annual report is due on your anniversary date. So that is the date that you registered in the state. An example of that would be Arizona. So if you registered in Arizona on October 15th, your annual report is due October 15th each year.

And in rare cases, sometimes the jurisdiction can pick your due date for you. This is really only seen with older companies, companies that are 30, 40, 50 years old. In Arizona, if you registered before 1997, they assign a due date to you.

So what are some challenges of annual reports? There can be a lot of information to keep track of. Number one is just staying on top of the due dates. It can be challenging to stay on top of the due dates because of all the varying due dates from jurisdiction to jurisdiction.

It's also challenging just having knowledge of all the filing requirements like: How do I complete this filing? Is this an online filing? Is it filed on paper? What type of signatures will the state accept? How do I pay for my filing? When am I going to get my filing back? Those are all questions that we hear from clients when they come to us asking for assistance with the annual report filings.

Another challenge is just managing all the relevant data needed to file an annual report such as: Where does my company house all of our officer and director information? How do I find out the shares our company has on file? And also it can be a big time commitment to complete all these filings, especially if you are a larger company with many business entities.

All right. So say you miss a filing deadline. Now what happens? So the first thing that will happen is your company will fall out of good standing. The whole purpose of filing an annual report is to maintain your good standing status. That means you are in compliance with the secretary of state's office. So the day after you miss a deadline, almost in all states, your status will change from active or to pending inactive, not in good standing, some similar status that shows the annual report has not been filed for the year.

And then after a certain amount of time, if your annual report is still not filed, the state will revoke your registration, which means you are no longer legally allowed to conduct business in the state. Each state, just as due dates and requirements vary from state to state, the revocation process varies from state to state. Some states you can be revoked in as little as 30 days. Others it can take you around six months before you're revoked. But that is the last thing you want to happen because that can cause a lot of other complications.

When a company goes revoked, you lose the exclusive rights to your name. So if your company is in a revoked status, any other company that comes in while you're revoked could qualify using your exact name because your company is showing as inactive.

While you are not in good standing and revoked, you will not be able to obtain a good standing certificate, which is a document used for several business functions. A lot of times in real estate deals, when deals are closing, the party needs to see that your business is in good standing. Also good standing certificates can be needed if you are trying to open a bank account. The bank is going to want to see that your company is in good standing.

Also you're not going to have the ability to bring a lawsuit. You need to be in good standing for that as well.

And when you do go to reinstate your business after revocation, there are penalties and fees associated with that. The penalties and fees vary from state to state and can be significant. In states like Illinois, the fees can be thousands of dollars based on the amount of paid-in-capital the company has on record. And in Delaware, the interest accrues monthly.

Andrea: So far in our discussion we've mostly been referring to U.S. subsidiaries, but annual reports can pertain to companies with a global presence as well. Managing compliance reports and good standing can become much more nuanced and challenging if you have a broad global footprint. We've kind of broken this down into a couple areas here.

U.S. territories, like Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin Islands all have annual reports or equivalent filings. There's a critical difference that's more prevalent in jurisdictions outside of the U.S., and that's the penalties incurred for missed filings. Kevin did highlight that there are some pretty severe financial penalties for missing these filings, and there can be repercussions. These consequences and financials can really become even more severe for entities that are domiciled outside of the U.S., to the point where there could be not just civil but even criminal proceedings in some cases for falling out of compliance.

I saw a question come into the Q&A widget, from Victor, specifically around Canadian requirements. Canada is kind of an interesting part of the world to talk about, and requirements differ based on the domestic jurisdiction of Canadian entities. An extra-provincial registration is an entity with a domestic jurisdiction outside of Canada. For example, it could be a U.S. domestic entity registered to do business within a province of Canada, or an entity that's formed at the federal level in Canada. These extra-provincial registrations likely require that a registered agent be appointed, and annual reports need to be filed appropriately. Entities that are actually formed in and domestic to Canada commonly have additional corporate secretarial requirements beyond basic registered agent and annual reports, including things like annual general meetings and Canadian residency requirements for some of the board members.

On the topic of corporate secretarial services to maintain other entities that are domestic outside of the U.S., the compliance requirements vary drastically by country to country and based on entity type. But again, the penalties for missing those deadlines remain just as severe. Not only can missed filings worldwide cause months of additional work, they also have some serious legal consequences for your business and much higher financial penalties than we typically see here in the U.S.

Kevin: All right. So now that we have all this good information about annual report filings, you might be asking yourself, "What about my business licenses?" It is very important to remember that business licenses and annual reports are two separate things entirely.

When it comes to business licenses, these are more local level and agency level. So they can be required at the state, federal, county, and city level. There are over 160,000 jurisdictions that a business license could be filed with. Some examples of licensing authorities are the Department of Health, Department of Insurance, City of Newark. Depending on the nature of the business, one business could be required to file several different licenses. Think of like a restaurant. You could have your liquor license, your health code license, several licenses just for a single business.

When it comes to annual report filings, these are specifically filed with the secretary of state. Annual report requirements should be referenced by other state agencies when filing documents, such as real estate or business licenses. So an example of this is in Massachusetts. On the Massachusetts annual report, they ask for your real property signers, and those are individuals that are authorized to sign documents related to real property. There's an agency in Massachusetts that references the information reported on the Secretary of State annual report. Florida also does this a lot. They refer to the Florida annual report to see if individuals signing certain licenses are on record with the Florida Secretary of State. And again, the purpose of an annual report is to maintain your compliance in the state.

All right. So as the year is coming to a close, we wanted to share some insights for the 2025 annual report season. So first and foremost, more legislation changes are coming. States are routinely changing filing requirements. Sometimes they adjust their fees. Colorado, for example, for as long as I can remember, the fee was $10. They recently adjusted it this year to $25. States like Kentucky, just the basic filing listing your address, officers, and directors, they added some survey questions to their filing this year asking for what county you conduct the most business in Kentucky and how many employees you have working in Kentucky. They also wanted to know like your NAICS code, codes that describe your business activity. So states do make changes to their filings, but CSC does monitor all changes very closely and we do inform our clients of those changes.

States also routinely change their process for sending notifications. Some states send filing reminders via email, via mail. Some states are just stopping sending notifications altogether. They just post the due date on their website and say, "This is when our annual reports are due. Please file by this due date." That just goes back to CSC's Compliance Calendar tool. CSC calendars all the due dates for our clients' annual reports, so that is just one less email you have to wait on, one less notification you're waiting on to receive.

We also anticipate more legal departments streamlining services and working with their registered agents to add the annual report and entity management services that they offer. We also believe more states, this has been a trend that we've seen over the past couple of years, more states are moving away from paper filings and filing online. In states that do still require paper filings, they're becoming more and more accepting of electronic signatures, such as Docusign. Illinois is a primary example of that. They do offer online filing services, but for corporations calculating an allocation factor, you do still have to file on paper, and they now accept Docusign signatures, which has been a great help for us.

There are also changes in filing timing. This is specific to Pennsylvania. This is starting January 1 of 2025. Historically, Pennsylvania was an oddball state for annual reporting as they used to have what was called the decennial report. You only had to file once every 10 years just to let them know you were still out there. However, starting in 2025, this is changing to annual reporting for the first time ever. So the due dates for annual reports in Pennsylvania, all the corporations will have to file by June 30th, all the LLCs will have to file by September 30th, and then all other entity types, such as limited partnerships, professional corporations, etc., they'll all have to file by 12/31.

So those are just some insights we foresee for the coming year.

Andrea: I'm excited to share with you some of the benefits of partnering with CSC. So we're going to get into how CSC can help you with your annual report filings.

Earlier in our discussion, I mentioned CSC's mission to provide world-class service and offer solutions that integrate the services that we offer along with powerful technology tools. CSC is very unique in that we are not just a service company and not just a software company, but really a pairing of the two.

CSC provides 24/7 access to CSCNavigator, which is our technology platform that complements the services that we complete for our clients. Later in our webinar, we're going to take a look at a demonstration of the CSCNavigator platform and how data, documents, and information from CSC's registered agent and annual report services will flow automatically into that technology.

This is a software-as-a-service platform, where our clients can log in securely and have complete visibility to what I would really describe as their complete entity portfolio. It will show things like the names of companies, entity types, where they're formed and qualified, other critical information like the dates of registration and statuses. The statuses will update periodically as we receive updates coming in directly from the secretary of state databases.

This technology also provides access to what we call a Good Standing Calendar, which Kevin referenced earlier, which really gives the automated visibility in terms of when your annual report filings or other secretary of state requirements are coming due. Kevin also shared with us the challenges of trying to understand these different due dates since there can be so many different rules that can govern when they're actually due. So with the Good Standing Calendar, all of that complexity is taken away, and all of the rules, so to speak, are built into the technology to give you a clean and clear insight as to when those filings are due and required.

That tracker grid not only tells you the due dates, but it serves as a centralized tool to help your team track and organize the details, such as who's handling the filings, the status of the filings, notes, comments, payment amounts and check numbers. When CSC provides annual report services, we actually automate the upkeep of that status or tracking grid so that you can see the status of the filing and the completion as our team completes that work on your behalf. Our clients can also receive notifications in advance of these deadlines so that they can be sure to have adequate notice and stay on top of the filings or again have that transparency and visibility into CSC completing that service for you.

It is incredibly popular for clients to choose to leave the management of those reports and complexities up to CSC because there are so many other responsibilities that you have to take care of when you're running your business. So you can really rely on CSC to quickly and accurately complete those reports on your organization's behalf.

Notably when we do those filings, whether it's the completion of an annual report or really any other action, such as a formation or a dissolution, a name change project, a DBA registration or a renewal, a copy of that filing and the evidence that's received from the state that the filing was completed and accepted will be uploaded and flow automatically into the CSCNavigator technology. Those documents are uploaded and indexed by entity. They're stored in the software tool forever so that you can have perpetual access to that filing within the secured and encrypted technology.

There are a lot of great benefits to the CSCNavigator software that we include with registered agent service. It's important to note though that CSC also offers an award-winning entity management solution that can provide additional features and capabilities for customers that want or need more. We have a number of organizations that would say, "I love that I can log in to your Navigator platform, I can get great visibility and transparency into my entity portfolio, but I want to go beyond that. I have custom data that I want to track in my entity, or I want to be able to upload and store my own documents and files and not just see the documents that CSC uploads for me." Or maybe, "I want to track officers or directors or members or managers." So this is going to allow you to really harness the power of our Entity Management solution and proactively utilize those features on your own.

With our technology platform that we call CSC Entity Management, these capabilities, as well as other features, are made available to our clients. So it will enable you to click a button and get a visualization around your ownership charts or corporate structure based on the legal entity structure, or again to be able to track your directors and officers, or create and manage online kind of digital minute books within the filing cabinet or any other types of documents that are important to you, whether it's contracts, officer or director documents. The platform supports the creation of an unlimited number of custom fields so that you can configure the platform and pick and choose what information you might want to track beyond the basic data that CSC manages on your behalf. So a lot of again powerful capabilities that you can leverage.

All of the data within the platform is completely searchable. It's sortable. It's reportable so that you can generate strategic reports for auditing, for tracking, or other decision-making purposes. Probably the greatest strength of all, when we talk about our Entity Management platform, is that it's not a standalone database. It's built right on top of the basic platform containing all of the data and documents that CSC manages for you. So all of that incredible, vetted data from our registered agent or annual report services forms the foundation upon which your other data and document management is built.

Also we continue to make enhancements to the Entity Management system so that you can leverage powerful capabilities, like an integration with Docusign, an integration with Workday Human Capital Management. We also just recently released an enhancement which allows customers to not just store documents inside of the Entity Management system, but to actually be able to build and create and even follow a guided workflow to generate one or many documents in a bulk fashion within the technology. So again, a lot of powerful mechanisms within the Entity Management system for customers that are looking for additional capabilities.

So we talked a bit about the CSCNavigator technology that comes along with having CSC as your registered agent. I just talked about the Entity Management system, which is that upgrade that clients can take advantage of to go beyond some of the basics that we maintain within our technology. We haven't spoken about the benefits of having CSC as a partner for the completion of your annual reports for your entities. Kevin, this is what you do day in and day out, so please share with us your expertise and talk to our audience about some of the specifics of CSC's annual report services.

Kevin: Absolutely. So first and foremost, when you sign up for CSC's annual report service and you are going through the onboarding process with us, one of the first things we do is we complete an audit, it's called an annual report audit, of all of your registrations to determine the last filed annual report on record. It's really like a health check. So we catch any filings that maybe past due. We'll also let you know what's coming due in the near future. Also it's just peace of mind knowing that your annual reports are being handled and you also have a dedicated annual report specialist, similar to someone like myself. CSC, you always have a specific annual report specialist assigned to your account that you can call or email anytime you need assistance.

We also, as we mentioned with Entity Management and the compliance calendar, we're tracking your filing deadlines. We are also preparing the annual reports on your behalf and submitting them for you. So another thing at the onset of service for onboarding we ask you to complete an annual report questionnaire, which is just a questionnaire that asks for all the company specifics, such as officers, directors, business purpose, stock information, EIN, all the basics we would need to complete an annual report on your behalf.

And you can also choose your invoicing options. We can email you invoices one by one after each filing is completed, or we can set you up for summarized invoicing so at the beginning of each month we can send you a summarized invoice that outlines all the invoices that were billed to your account for the month prior, which can come in handy if we are filing hundreds of reports on your behalf.

Okay, so here are some questions to ask yourself to kind of evaluate your current annual report process. What assurances do you have that your organization is in good standing and is not at risk for paying penalties? What is the process for transitioning annual report filings when the current person changes roles? What is your backup plan to file a report on time if the state's website goes down on the due date? How are you saying on top of your due dates? How do you manage and keep track of the evidence of the filings? If you are asking yourself any of these questions, why not partner with an expert like CSC to take annual report filings off your plate?