What Is an Annual Report?
Annual report are financial documents that include summary of a company’s activities during the year in addition to the management’s analysis of the company’s financial performance. Every corporation and limited liability companies (LLC) also require filing annual reports each year with the government entities or with your shareholders or clients. These annual report also contains latest information about the company’s name and address, registered owner, nature of the business, and the revenue.
The decision to start a business comes with some staggering realities. Running a business is extremely hard especially when it comes to managing your business finances. Financials are essential aspect of a business to make sure that it’s up and running efficiently, but also to continue to legally operate. The annual reports are the foundation of this financial riddle.
These annual reports are detailed documents that publicly held corporations distribute to their shareholders and/or investors to show the company’s achievements for the past financial year, future forecast, and comprehensive financial statements.
In this detailed guide on small business annual reports, we’ll explain the types of annual reports, and how to file it with the state.
Elements of Annual Report
Unlike reports filed by publicly held businesses to comply with U.S. Securities and Exchange Commission rules, state-administrated annual reports are comparatively short and candid. They typically include basic information including:
- Business name and address
- Business model
- Registered agent details
- Names and addresses of senior management in case of corporations
- Names and addresses of members of an LLC
While it’s not compulsory, small businesses are also require to add the following elements in their annual reports to make it all-inclusive. The list includes:
- Business owner cover letter
- Highlights of the previous year
- Financial information, and financial position
- Financial and accounting data
- Complete information about products and services
- Investor information
- Management discussion
- New product plans and future activities
After the preparation of annual reports, external auditors must verify it as complete and reliable.
Types of Annual Reports
There are three major types of annual reports:
- Publicly traded company annual report
- Small business annual report
- Nonprofit annual report
- Publicly Traded Companies Annual Reports
Usually people consider this type as the annual report. The Securities and Exchange Commission (SEC) necessitates publicly traded companies to file annual reports with them, so it can be available to everyone including the shareholders, the media, and the public. These annual reports are filed on Form 10-K, and include a summary of the company’s financial accomplishments along with audited financial statements for the year. Here is an instance of an annual report from Alliance Holdings GP, L.P.
- Small Business Annual Reports
Privately owned small businesses have less arduous annual report requirements. As a startup, you’re liable to comply with federal, state, and local government rules. Registered small businesses, like corporations and LLCs, are liable to file an annual report with the secretary of state being it the rule in some states and localities. These annual reports provide latest information on your business structure, its management and staff, and its financial position in order to calculate your state business taxes.
If you file your report regularly each year, your business is considered in good standing. Unable to file report or fail to meet the filing deadline means you be deprived of good standing and will have to pay penalties, fines, and perhaps even interest to restore it. It’s not just a formality, non-filing can have adverse effects on your business such as losing potential customers, low credit limit from vendors, and business liquidation by the state.
- Nonprofits Annual Report
Nonprofit institutions such as charities, private schools, and think tanks are also require to file their annual reports. Actually, most exempted charitable nonprofits from federal taxes also require to file annual reports on Form 990 with the Internal Revenue Service (IRS). Aside this form, there are some nonprofits that also have to send a separate report to their network. Nonprofits annual reports feature the institution’s responsibility, campaigners or milestones from the previous year, and financial return. This can also be used as an opportunity to express gratitude to supporters and volunteers, and to encourage donations.
How to Prepare Annual Reports?
- Assign tasks to staff members
- Write an introductory letter
- Collect financial data
- Get auditor’s attestation
- Collect management reports
- Create your corporate message
- Collect reports and congregate the draft
- Assemble your report
- Share your company’s annual report
How to File Annual Reports?
The process of filing annual reports differs based on numerous factors, including:
- Registered business state
- Type of business entity
- Time of business formation (procedures linked to annual reports can and do change)
The process of filing annual reports is simple and can be done online. Simply visit your local state government website; look for form in the Business, Corporation, or Franchise Tax section. You can also visit the local State office to get information you need to fill out the form. Fill the form, pay your filing fees, and franchise tax either by mail or online and you’re on your way to file your annual report.
Include the most updated information in your annual reports while filing it every year and make necessary changes as needed. Remember, make sure you file your annual report on time else there are penalties and fees for late filings.
Annual Reports and Registered Agents
While setting up a business, every business owner is required to select a registered agent. That registered agent is an arbitrator, who is sanctioned to obtain official announcements and communications like tax forms or lawsuits on behalf of your business.
This is necessary for a business registered in a state different from its physical location, so a registered agent in that state can receive official announcements on company’s behalf. The registered agent can also keep you updated on your annual report filing deadline, and even file it for you.
Managing your small business finances is key to your company’s success and annual report is one important element of it. Before filing your annual report, endure you comprehend your state and locality’s filing requirements.