Pennsylvania Annual Report Update
Starting on January 1, 2025, most Pennsylvania business owners will be required to file annual reports, a significant change from the decennial reports of the past. Governor Wolf signed Act 122 of 2022 on November 3, 2022, making annual reports a requirement for both domestic and foreign business filing associations. The change is a departure from prior rules which required businesses to file with the state every ten years. The new reporting rules align Pennsylvania law more closely with other states that require similar reports. It is important to become familiar with the details of the update because there will be penalties once the grace period concludes on January 1, 2027. To help clients, prospects, and others, Klatzkin has provided a summary of the key details below.
Which Businesses are Required to File?
Annual report filing will be required by most domestic businesses, as well as all registered foreign associations. Domestic businesses impacted by the requirement include corporations, nonprofit organizations, limited liability (general) partnerships, limited partnerships, limited liability companies, electing partnerships, professional associations, and business trusts.
General partnerships that are not limited liability partnerships, fictitious names, authorities and their subtypes, land banks, financial institutions, credit unions, name reservations, name registrations, trademarks, insignias, and marks used with articles and supplies are not required to file annual reports.
What Happens if an Organization Fails to File?
If a business does not file an annual report starting in calendar year 2025, it may be dissolved, terminated, or cancelled. Businesses may also lose protection of their names if they fail to file. Overlooking the new Annual Report requirement can also lead to other future complications for a business. For example, when securing financing, a Subsistence Certificate (or Certificate of Good Standing) is needed to finalize the deal. If a business has failed to file its Annual Report, it might receive a certificate reflecting that issue. Lenders could refuse to proceed until it’s resolved, forcing the company to file the report urgently, complicating an already busy closing process. These and other situations can be avoided by assigning someone to manage the Annual Report now.
What’s Required as Part of the Annual Reporting?
Businesses will include the following information on their annual reports:
- Business Name
- The jurisdiction where the business was formed
- Office address registered under the business
- Name of at least one governor for the business (this can include members, directors, or partners depending on the type of association of the business)
- Principal officer names and titles
- Principal office address
- Entity number, provided by the Pennsylvania Department of State
The Annual Report demands more detailed information than businesses typically provide. Key stakeholders need to decide who will be listed as “governor” and “principal officers.” Some stakeholders, like passive investors or silent partners, may prefer not to have their names publicly disclosed. Organization leaders should start identifying which names or positions they wish to include.
What Does it Cost?
Businesses will pay $7 to file if they are a corporation, limited liability company (LLC), limited partnership (LP), or limited liability general partnership (LLP). There are no fees for nonprofit corporations, as well as LPs and LLCs that have not-for-profit purposes.
What is the Deadline for Filing?
Deadlines, like fees, depend on the type of business that is filing. All corporations will be required to file by June 30 of each year. Limited liability companies, both domestic and foreign, must file by September 30. Other domestic filing entities and foreign filing associations that don’t fall under these categories must file by December 31.
How Will Businesses Be Informed?
It’s important to note the company’s business registered office address. This is the address where the Department of State will mail notices about annual report filings. Notice will be given at least two months ahead of time. Not receiving the notice due to changing offices or other contact information does not absolve one from meeting the deadline.
However, because the change is significant for Pennsylvania business owners, there will be a transition period for entities that fail to file annual reports in time. This transition period will end with annual reports filed in calendar year 2027, which may result in cancellation, dissolution, or termination if businesses do not file within six months of the annual report due date.
Can Businesses Reinstate?
If a business has not made an annual report in time, it can be reinstated, with no limitations on the period of time in which it can occur. However, businesses will need to pay a fee and apply for reinstatement, as well as pay a fee for each annual report that went unpaid and delinquent. Foreign associations need to reregister via a Foreign Registration Statement to reinstate the business.
Contact Us
The effective date for the new filing requirements is January 1, 2025. Businesses should become familiar with the details to ensure proper compliance. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Klatzkin can help. For additional information call 609-890-9189 or click here to contact us. We look forward to speaking with you soon.