Annual Reporting Requirements and Keeping Your For-Profit Entities Compliant

Every year, many entities miss the important requirement to file their annual reports as mandated by state law. Depending on the state where the company is registered, if an entity does not file the required annual report, the state will declare the entity in default and eventually cancel the state charter if the annual report is never properly filed. Texas requires the following entities to file a Franchise Tax/Annual Report with the Texas Comptroller:

• Certain partnerships,
• Corporations,
• Limited liability companies (LLCs),
• Professional and business associations,
• Joint ventures,
• Business trusts,
• Nonprofit entities who have not requested or been granted an exemption, and
• Other legal entities.

The annual franchise tax report is due May 15.

A for-profit entity jeopardizes losing the very protections it gains as a registered entity of the state by disregarding corporate formalities, which are those requirements a company must follow to be legally compliant as a registered company in the state. Additionally, depending on the type of entity, failure to comply could subject officers, shareholders, directors, or members to individual liability. Maintaining corporate formalities should be a way of doing business and incorporated into a company’s policies and procedures. Warner & Associates recommends that you develop a compliance checklist and review it on a periodic basis. Here are suggested items for your checklist:

 Hold annual board of directors’ and shareholders’ meetings (corporations), and additional meetings as required by your governing documents (corporations, LLCs, partnerships, and other types of entities).
 Maintain a registered agent and office and if such information changes, file a statement of change of registered agent and/or registered office with the Secretary of State.
 Review and amend bylaws on a periodic basis.
 Keep an accurate and correct stock book.
 Hold regular meetings and maintain a minute book.
 Prepare and adopt corporation resolutions for major decisions and actions of the officers or management (for example, the election or appointment of officers and/or directors, authorization of a contract, issuance or selling of stock, hiring or dismissal of employees, approving the sale of company assets, or authorizing a major transaction or merger).
 Amend the Certificate of Formation as necessary (for example, when a corporation exchanges, reclassifies, or cancels issued shares’; to change the name and/or address of the registered agent, etc.).