The Annual Report is a document required by statute that updates basic information of the company, including the names and addresses of the officers, directors, and/or managers, as well as the company’s principal business address and registered agent information and address.  This is so there is accurate information on file on how to contact the company and who is authorized to speak for the company. Companies that don’t file their report will be suspended by the Secretary of State, and you could lose your limitation of liability. 

For corporations the fee is $18 (plus a $2 fee) if submitted electronically online and $25 if sent by mail.  They are due when you file your corporate tax return (usually March 15).  For limited liability companies, the fee is $200 (plus a $2 fee if filing electronically). They are due by April 15.  In addition, corporations are required to hold annual meetings of shareholders and directors. Failure to do this could also result in losing your limited liability. 

Professional corporations (PCs or PAs) and professional limited liability companies (PLLCs) are not required to file annual reports, but professional corporations should hold annual meetings of shareholders and directors.

For more information, click on the Annual Report document here.

The first thing I told him to do was to email me from his personal email account and not his current employer’s email account. After that, here was my list of considerations for someone in the conceptual stage:

1. Are you under any kind of non-compete, non-disclosure or non-solicitation agreement? If so, we need to make sure you’re released or non-violating.
2. Come up with a business plan that is as fleshed out as possible. Figure out your start-up costs and ongoing costs. Think about things like software you might need to buy, as well as more mundane things like business cards, web site, email, etc. Good resources for this are the NC Small Business & Technology Development Centers and the Service Corps of Retired Executives (“SCORE”).
3. Figure out a reasonable start-up budget, including where the capital is coming from. How long will it be before the venture is profitable and what will you live on in the meantime?
4. Start brainstorming for names that both identify what you do, but stand out in the marketplace. Potential names should be screened for availability at the Secretary of State level, and cleared from trademark infringement. I advise doing this early, so that you don’t get “married” to a name that turns out to be unavailable.
5. This particular business required the professional to be licensed, so I advised checking to see if additional entity-level licenses were needed beyond the individual license my acquaintance had.
6. Talk to your CPA about LLC/S-corp. From a legal perspective they give the same protections (if properly formed, maintained and capitalized, but there may be significant tax savings in one entity over another.

In my 15 years of practice, I’ve never seen reports go out like this. Companies with one or more missing annual reports are getting letters warning them that their companies will be administratively dissolved if they don’t file the missing reports and fees within sixty 60 days. While this is indeed the law of the state, typically the Secretary of State didn’t send notices until the company was five years late.

Apparently the Secretary of State has conducted an internal audit, and has contacted every company that is in violation of the statute. The notices are not always right, so you need to check your company’s situation directly with the Secretary of State’s web site.

Here are some guidelines to help you in determining if your entity owes an annual report for certain situations.

• LLCs that are formed between January 1 and April 15th of a given year will owe an annual report (and fee) on April 15 of their first year. Many LLCs believe they don’t owe an annual report at all for the first year, so when they file in their second year of operation, the report is counted for the first year, putting the company one behind.
• We have noticed that accountants routinely file annual reports for their corporate clients, but sometimes do not prepare them for LLCs. It is important to ask your CPA what is going on.
• Business Corporations are required to file an annual report at the end of their first fiscal year, even if it is a short year. Many corporations do not file until the end of their second year. This report is counted toward the first year by the Secretary of State, and the company is behind on its annual reports.
• Often a company will file its report, but forget a piece of information or a signature. The filing fee will be kept, but the document will be rejected and sent back with an explanatory letter. If these reports are not corrected and re-submitted, the company will be behind on its annual report.

These notices have been sent to the company’s registered agent. If your registered agent is your attorney, you will receive the notice and instructions on how to fix the problem. If you serve as your own registered agent, make sure you file your missing reports and fees within 60 days, or you will not have a valid entity and could lose your limitation of liability.

What she had protected was her trade name. What was being infringed was her trademark. Many entrepreneurs don’t understand the difference, and if they don’t consult with a trademark attorney, valuable intellectual property can be left unprotected.

A trade name is the company name that is registered with the Secretary of State. To be registered, the name has to be different (by as little as one character) from existing company names. That is why we can have all the following company names in the North Carolina Secretary of State database:

Acme Cleaners, Inc.
Acme Cleaners & Laundry, Inc.
Acme Cleaning, Inc.

Although the Secretary of State allows all of these companies to co-exist, it will be impossible for the potential customer who just spilled black coffee on his trousers to distinguish which Acme Cleaners is the on the corner when he looks them up in the phone book.

Using the name in commerce to designate your company as the source of a good or service, is use as a trademark (or brand name). This is governed by a whole other regulatory scheme that is completely independent from the Secretary of State. A company’s trademark may be the same as its trade name, but they are often different.

Trademarks can be:

• words (MICROSOFT, KRAFT);
• stylized words (COCA-COLA in script, FORD in the oval);
• symbols and designs (LEVI’S stitch, CHEVROLET logo);
• shapes (CADILLAC fins, PEPPERIDGE FARM goldfish);
• letters (IBM, CNN);
• numbers (409 cleaner, CHANEL No. 5 perfume, FORD 150 truck);
• telephone number combinations (1-800-MATTRESS, DIAL-LAWYERS);
• abbreviations (COKE, BUD, VW);
• slogans (“YOU’RE IN GOOD HANDS WITH ALLSTATE,” “WHERE’S THE BEEF?”);
• colors (pink for OWENS CORNING insulation);
• container shapes (COCA-COLA bottle);
• building designs (MCDONALD’S restaurants, FOTOMAT kiosks);
• clothing (DALLAS COWBOYS cheerleader outfits);
• sounds (NBC chimes, MGM lion’s roar); and
• even fragrances (scented yarn).

If you don’t check the trademark availability of your business name before adopting it (in addition to the availability at the Secretary of State), there are a couple of ways you can hurt yourself: you might be one of 15 Acme Cleaners (hard to distinguish yourself in the marketplace) or you may adopt a name that infringes a third party’s prior use (and have to bear the costs of changing your name and re-launching your brand).

If your brand name is important to you, you should think about obtaining a federal trademark registration to give yourself the exclusive right to use your trademark throughout the United States and to stop others from using a name that is substantially similar to your or likely to cause confusion in the marketplace.

While corporations are required by NCGS Section 55-7-01(a) to hold an annual meeting of shareholders, minutes of these meetings are not required to be filed with the Secretary of State (or anywhere else). Compliance Services is not affiliated with the Secretary of State’s office or any other state department or agency, and is the subject of an injunction prohibiting it from conducting business in NC.

What must be filed with the Secretary of State, however, is the corporation’s annual report. The Secretary of State’s web site can prepare a pre-printed annual report for your review and submission. Corporate annual reports are due when the corporation files its income and franchise tax returns. The fee is $18 if done online via the Secretary of State’s website or $25 if done manually and submitted to the Department of Revenue.

Limited liability company annual reports are due on April 15, of each year, even if the company was formed between January 1 and April 15 of that year. The fee for an LLC annual report is $200.

Companies that do not hold annual meetings of shareholders or properly store the minutes could lose their limited liability, making the owners potentially liable for the debts and actions of the corporation.

The mailing reportedly encourages recipients to send $125 to Corporate Services, Inc., which would provide appropriate minutes to avoid dissolution. The Attorney General and the Secretary of State have secured a temporary restraining order against Corporate Services, Inc. to halt this mailing. If you receive such a mailing, fax a copy of it to the Secretary of State at (919) 807-2010 or send it to your business lawyer.

Nevertheless, this mailing does make a good point. To retain their limited liability, corporations do need to file annual reports and associated fees with the Secretary of State’s office, hold annual meetings of shareholders and directors, and keep minutes of the meetings.

In addition, just filing Articles of Incorporation is merely the first step in forming a corporation. To be properly formed, the corporation must have issued shares, named directors and officers and held an organizational meeting. If you have not taken all these steps and are not holding annual meetings of shareholders and directors, you are not getting the legal protection you think you have, and your personal assets could be at risk in a worst-case scenario.

We work with a lot of entrepreneurs who have let the formalities slide because they were busy running their business. It is relatively easy to bring a corporation back into compliance, so I encourage you to find a business attorney to assess your risk and estimate the costs of bringing your corporation into compliance.