Many first time business owners often fail to realize that there are numerous ongoing administrative processes and expenses required to keep an organization in good standing. Two of the most important of these processes, which need to be attended to each year, are the filing your business’s annual report and the paying your franchise taxes. Read ahead to understand exactly what these two requirements are, what they consist of, and how to successfully ensure that they are being handled properly.
What is an annual report?
When many people hear the term “annual report” they envision the long-form detailed reports that large corporations send to their shareholders. This technical term actually refers to a much smaller document that is required of all businesses, no matter how large or small. This report must be filed by yearly by every business, with very few exceptions.
An annual report of this variety typically requires you to provide a few rather basic details about your business. These details vary from state to state, but typically include the business’s address, as well as the names and addresses of its primary managers. If you are a publicly traded organization, some stock information may be required as well. There is also a fee involved with filing an annual report, which can range from $50 all the way up to $400, depending on where you are located.
Why is this annual report necessary?
It may seem like filing a yearly annual report is a redundant process, but these forms provide an excellent way for state agencies to ensure that a business is keeping their contact information up-to-date and accurate. It helps the government ensure that a company’s stock statistics are consistently and accurately being reported. The associated fees also provide another source of revenue for the state.
What are franchise taxes?
Paying franchise taxes is another annually imposed formality. The name can be misleading, implying that it is only required of companies that are expanding the use of their business model. But this tax applies to all incorporated businesses. The method used to calculate this tax varies greatly from state to state, but can either be a flat fee or a figure based on a number of financial statistics. These statistics are commonly a business’s income, assets, stock shares outstanding and par value, or a combination of these numbers.
When are franchise taxes due?
There are two ways that states handle franchise tax due dates. Some states require that the business files and pays them on the month of its inception every year. Some states have a set date that all corporations must pay their franchise taxes by, or have a unique set date for each separate industry. Your state’s business services website should tell you how your state of incorporation handles this process. Any accountant or professional registered agent should also be aware of this date as well.
There are also several other internal and external formalities required for most types of formal business structures. Be sure to pay close attention to what these requirements may be for the structure you choose for your business. Some states also require new corporations and LLCs to file an initial report that is similar to an annual report. Should you ever have any questions regarding any ongoing business formalities, it is always best to talk to relevant business service professional.
Swyft can help!
Many businesses choose to outsource some of these yearly tasks to a trusted partner. Want to know how Swyft can help you?Talk to one of our business experts!