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Annual Report - Myth or Reality?

Often, a company misses a state annual report filing  due to a misconception. The information below helps eradicate some of the popular misconceptions that have cost businesses in the past.
 
MYTH: Missing an annual report deadline doesn't impact financing.
REALITY: An LLC  or corporation that misses the deadline could lose its “good standing” status with the state, which can limit its financing options. Many lenders and funding sources may require good standing status, and they’ll ask you to prove it by producing a certificate of good standing
 
MYTH: If I don’t file annual reports, there are no consequences.
REALITY: Late filings can result in penalties and fees. If you delay long enough, the company could be dissolved by the state, which means losing the many benefits of operating as an LLC or corporation.
 
MYTH: Failing to file won’t cause me to lose a contract bid.
REALITY: Yes, it could. A failure to file could result in a loss of good standing—and that could cost a company the bid. Properly filing timely annual reports helps maintain a company’s good standing status in state records and keep it on track for success.
 
MYTH: We stopped doing business in a particular state, so we don’t have to file an annual report there.
REALITY: Even if a company stops doing business in a state where it previously registered, it still has to continue to file there until it properly withdraws from the state. Otherwise, there could be failure-to-file penalties.
 
MYTH: I filed the state income tax return, so I’m covered.
REALITY: State annual reports and state income tax returns are different things. Even if one has already been filed, the other still needs to be filed.
 
MYTH: I never received a notice, so I don’t have to file.
REALITY: Although some states send reminder notices, not all do. Either way, you still have to file any required annual reports. The burden is on you to keep up with your deadlines and file on time.
 
MYTH: I have a business license, so I don’t need to file an annual report.
REALITY: Obtaining or renewing a business license is not the same thing as filing an annual report. Even if a company has all necessary business licenses, it still needs to file its annual reports.
 
MYTH: Once I’ve formed my company, I don’t have to file anything else.
REALITY: Just like tax returns and business licenses, formation and incorporation filings are different from annual report filings. After forming an LLC or corporation, a "next step" is to file state annual reports. 
 
Staying on top of annual reports helps to keep your company in good standing status with states. Maintaining your good standing status helps ensure you’re prepared when a potential lender, investor, vendor, or customer asks you to provide a certificate of good standing.
 

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