Corporations are required to send yearly financial reports under the Securities and Exchange Commission. This is the definition of a corporation's annual report, and it should describe the corporation’s business and operations for the duration of the previous year. It is provided to the shareholders to outline operations, and explain the financial conditions. It should also include prospects for the future.
The front part of the corporation's annual report typically provides graphics, photos, and information regarding the activities of the corporation. The back part of the report is where the detailed financial and operational information is.
What Should be Included in an Annual Report?
The annual report is an essential part of reporting to the state as a corporation. There are specific legal requirements when it comes to reporting and specific items that should be included. Typically an annual report will provide an overview of the business, but also include aspects that specifically pertain to its business.
Chairman’s Letter
Most annual reports begin with an introduction. This is often in the form of a letter from the chairman, who is the CEO of the company. This is addressed to shareholders and should showcase the last year of work in the company, as well as a general overview. You might also include any challenges that were overcome, as well as success, and how the company has grown over the last year. The table of contents comes next.
Business Profile
The business profile provides insight into the vision, mission statement, as well as who works with the company. This means that there will be details regarding the directors, officers, and investors. It can also outline what the company does to produce revenue, and who competitors are.
Management Discussion and Analysis
It is important to analyze the performance of any corporation. This section has done so for the last three years. It includes profit margins, as well as overall sales. It might also include new launches in terms of products or services, and anyone who has been newly hired. It should showcase information that is beneficial for the stakeholders.
Financial Statements
The financial statements are most likely the most important part of the report. This area showcases to the investors what is going on in the company financially. It can show the past performance, how the company is paying off debts, and how it plans to grow into the future.
Financial statements should include:
- Balance sheet
- Cash flow statement
- Income statement
- Shareholders statement
How to File an Annual Report for Your Corporation?
In order to properly file an annual report, it must be done by an officer of the corporation. It is not incredibly difficult, but you should focus on fulfilling the following steps correctly.
Decide If You Need To File an Annual Report
Every state has different requirements, which means you may not need to file for your state. In Delaware, you are required to file an annual report every year for a corporation.
Find Out the Due Date
In Delaware, the due date is March 1st, but this is not the same in every state. Some states require biennial (every other year) filing, while there is even a decennial (every 10 years) filing.
Complete the Annual Report Form
Many states will allow you to fill out and file your annual report online. This can be done through the Secretary of State business filing agency website. The exact information that is required is different from state to state. Most often this includes:
- Name and address of the business
- Names and addresses of officers and directors
- Name and address of the registered agent
- Type of business your company engages in
File Annual Report
After filling out the form you need to submit it to the state. This should be done with the $50 filing fee. Do not forget to pay your annual fee for the next year, it can be smart to set a reminder for yourself ahead of time.
How Much Does it Cost to File an Annual Report?
The fees to file an annual report vary by state, and typically cost between $50 to $300. Delaware is on the lower end of the spectrum, costing $50 annually.
When Should You File an Annual Report?
The annual report due date is typically listed on your state’s business filing website. In Delaware, the due date is March 1 every year. This should also accompany taxes. The minimum tax is $175.00, for corporations using the Authorized Shares method, but a minimum of $400.00 for corporations using the Assumed Par Value Capital Method. In addition, all corporations will have a maximum tax of $200,000, other than “Large Corporate Filers” which has a tax of $250,000.
These taxes are collected for the 4th quarter payment. Any taxpayers owing $5,000 or more will need to pay estimated taxes in quarterly installments with 40% due June 1, and 20% due by September 1, the following 20% due by December 1, and the remainder due March 1.
What Happens if you don’t file an Annual Report?
If you do not file an annual report you will be subject to fines of $200. This is on top of the original annual report fee and taxes due. You will also be required to pay 1.5% interest per month.
Why an Annual Report is Important
All corporations use annual reports because it provides important information to the customers and investors, as well as employees. It also provides a platform to showcase the expectations for the next year, as well as key goals.
Providing transparency is essential in business and also helps to build trust with investors. Examining the strategy for growth and using it to make decisions can help keep a company modern and working towards the overall goals of the shareholders.