An annual report is a document that contains comprehensive financial information about public companies, small and large corporations, non-profit organizations, partnerships, and other businesses. It includes their financial performance and activities over the prior fiscal year.
Some types of businesses must prepare and file an annual report by law with the Secretary of State where the company operates. Other companies prepare annual reports to keep shareholders, employees, and the community informed regarding the company's financial health.
What is the purpose of an annual report?
In general, most states require corporations and other businesses with shareholders to file annual reports. If they fail to do so, they may lose their corporate designation and the tax advantages that go with that designation.
Annual reports can also be known as "business annual reports," "statements of information," or "yearly statements."
Beyond the legal requirements, they also:
- Help to attract new investors
- Retain the confidence of current stakeholders
- Provide business analysts and creditors with insight into the company's financial status
Depending on the size of the corporation (500 or more shareholders) and amount of annual profit (at least $10 million or more in assets), and whether it is publicly traded, in addition to filing an annual report, a separate filing with the U.S. Securities and Exchange Commission may also be required.
What is included in an annual report?
The requirements for filing an annual report vary in each state. In the states that require annual reports to be filed, the Secretary of State (or similar governmental entity) will normally prescribe the filing requirements.
In many instances, for ease of operation, the Secretary of State will forward—via electronic mail or United States mail—the annual report forms to the companies (or to their registered agent) that are expected to file them. The forms are relatively easy to complete and contain the requisite information to be included.
Alternatively, the forms can be located online, downloaded, completed, and filed electronically.
The annual report forms generally require the following information to be included:
- Information regarding the name of the company, business type, and registered agent
- Information concerning corporate officers and directors and the corporation's physical location
- A report from the CEO to update current and potential investors on the company's economic status, key events, activities and achievements, yearly highlights, details regarding new products or services, and future needs, wants, and goals, as well as the desired direction of the company
- The company's financial breakdown (including balance sheet summaries, a cash flow statement, capital investment data, an auditor's report, anticipated revenues, and expenses, changes in equity report, income statement, and other profit and loss details)
- A restatement of the company's core values, mission statement, and future objectives
There are normally annual report fees involved when you file the annual report, including, but not limited to, franchise taxes.
Who files the annual report?
A business entity's size will typically determine whether an in-house staff member will prepare an annual report or if an outside firm will be retained.
Larger organizations often have employees within the company who are designated to complete this essential undertaking.
When should annual reports be filed?
To the extent your state requires an annual report to be filed, it's always best to timely file required annual reports and financial statements with the Secretary of State, and pay any requisite fees.
A review of a state-by-state list of the annual report filing deadlines reveals that the filing date, the type of filing required, and the fees involved vary greatly depending upon the state in which your business was formed or is currently operating.
Be aware that the failure to promptly file the annual report and remit any fees due and owing could result in severe penalties or the complete dissolution of the business.
Do small businesses or LLCs need to file an annual report?
The annual reporting requirements for a small business or limited liability company (LLC) tend to be less rigorous than they are for larger corporations. Nevertheless, the majority of states require small businesses and LLCs to file some form of report to comply with state regulations and to maintain their good standing.
Although less comprehensive in size and scope, annual reports for small businesses and LLCs serve to generally inform the employees or members about how the company is performing and to share the management's vision for the future.
Depending upon the state in which the LLC is formed and operated, the yearly report may be called an "annual report," a "statement of information," an "annual statement," or something very similar.
What is the annual report requirement for large corporations?
Annual reports prepared by larger corporations normally have the most onerous filing requirements. The reports usually begin with a letter from the CEO or the president regaling the history of the company, recapping the previous year's activities, revealing the company's profit and loss outlook, discussing the short- and long-term objectives of the company, and touting the prognosis for future growth and prosperity.
The report may also include a mission statement, the names of the executive officers or board members, and a listing of the services and/or products the company offers .
Although designed to disclose the important aspects of a company's current financial position, an annual report often includes some "style point" elements as well, such as visually appealing graphics, photos and brand storytelling to enhance the company's corporate identity.
If you need assistance completing and filing an annual report, you can seek help from attorneys in your state.