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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 with its state of incorporation. Two of the most important of these processes, which need to be attended to each year, are the filing of a business's annual report and the paying of its franchise taxes. This article will help you understand exactly what these two requirements are and how to ensure that they are being fulfilled.
What is an Annual Report?
An annual report typically requires you to provide 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. Also, there is usually a fee involved with filing an annual report. The amount of the fee varies from state to state.
Why is This Annual Report Necessary?
It may seem like filing an annual report is an unnecessary process but it provides an excellent way for state agencies to ensure that a business is keeping their contact information up-to-date. It also helps the government ensure that a company's stock statistics are being regularly and accurately reported.
What are Franchise Taxes?
Franchise tax is another annually imposed regulation. These taxes are not imposed just on businesses that provide franchise opportunities, but are levied on all incorporated businesses. The method used to calculate this tax varies greatly from state to state and can be either a flat fee or a figure based on a formula.
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 while other states have a set date that all corporations must pay their franchise taxes by.