Richard Carlson’s advice “Don’t Sweat the Small Stuff” has finally met its match in Pennsylvania. Pennsylvania’s new annual reporting requirements for businesses registered here give busy entrepreneurs one more task to keep track of. The consequence of missing this task is a doozy: businesses that fail to comply could end up being involuntarily dissolved.
What is the Annual Reporting Requirement?
Act 122 of 2022 (the “Act”) creates an annual report filing requirement for domestic and foreign business entities registered in Pennsylvania. Beginning in 2024, all entities will be required to file an annual report with the Pennsylvania Department of State – Bureau of Corporations.
The stated purpose of this annual report is so that the Department has up-to-date information for each business entity registered and conducting business in Pennsylvania. The more likely reason is simply to generate additional revenue with a whopping $70 annual filing fee! The annual report must contain the following information for each entity: (1) its name and jurisdiction of formation; (2) the address of its registered office, if any, including street and number, if any, in Pennsylvania; (3) the name of at least one director, member, or partner; (4) the names and titles of the persons who are its principal officers, if any; (5) the address of its principal office, including street and number, if any, wherever located; and (6) its entity number or similar identifier issued by the Department.
The information provided in the annual report must be current as of the date the report is delivered to the Department for filing. The annual report must also be signed by an authorized representative of the business entity. Failure to submit a report containing all the required information will result in the rejection of the filing requiring a correction.
When are the reports due to be filed?
The annual deadlines are as follows:
Corporations: before July 1st each year
Nonprofit Corporations: before July 1st each year
Limited Liability Companies (LLCs): before October 1st each year
All other entities: before December 31st each year
What happens if a business fails to file?
Businesses must file annually to stay in good standing with the Department. There is a three-year transition period before the Department can take administrative action against businesses that fail to file an annual report.
Beginning in 2027, the Department has the authority to commence proceedings to administratively dissolve (for most entity types) or cancel (for certain partnership entities) a domestic business entity that has failed to file an annual report. If the Department determines that administrative dissolution or cancellation is appropriate for failure to file, the Department will deliver notice of the Department’s determination to a business entity. A business entity will have sixty (60) days to correct its failure and file an annual report.
Here’s the problem: The Department will mail the notice to the last address you gave to the state for your business. Many businesses have not updated their records with the Department for many, many years. If you’ve moved and failed to provide the Department with your new address (and you’re not alone if this describes you), you run the real risk of never receiving this notice. Failure to file the annual report within sixty (60) days of the date of that notice (that you might not actually receive) will result in the Department filing a statement of administrative dissolution or cancellation for your business.
What happens if the State dissolves your business?
A business that has been administratively dissolved or cancelled will be required to wind up its business activities, liquidate its assets, and cease conducting business in the State of Pennsylvania. Yikes! Upon dissolution or cancellation, the business name will be made available for another business entity to register. Businesses that have been administratively dissolved or cancelled may apply for reinstatement with the Department and incur additional fees.
Foreign businesses are not exempt.
Beginning in 2027, the Department also has the authority to terminate the registration of a registered foreign business entity that has failed to file an annual report. “Foreign” means a business formed in a different state but registered to do business in Pennsylvania. If the Department determines that administrative termination is appropriate, the Department will deliver notice of termination to a business entity with an effective date of termination. A business will have sixty (60) days to cure the grounds for termination. If a business fails to cure the ground for termination, it will be terminated as a registered business with the Department and unable to conduct business in Pennsylvania. Upon termination, the business name will be made available for another business entity to register. Businesses that have been terminated will be required to submit a new Foreign Registration Statement and will incur additional fees.
Can Fiffik Law Group assist with preparing and filing an annual report?
Yes, Fiffik Law Group, PC provides a full range of services to business owners, including filing annual reports. Contact our experienced business attorneys today.