Many states require corporations to hold annual meetings of shareholders. Most states do not require the same for LLCs, however, it is good practice to do so nonetheless (via an actual meeting or via written consent action in lieu of a meeting) in order to ensure that the LLC is operating in accordance with proper formalities. Companies that do not hold annual meetings or properly keep a book of minutes or written consent actions open themselves up to plaintiffs and their lawyers arguing that the corporate veil of the company should be pierced, thus potentially making the owners personally liable for the debts and liabilities of the company. In addition, most states in the US require some sort of annual reporting from companies – check your local rules for specific deadlines and protocols. Most deadlines will occur over the next 60 days.
Annual Meetings
Most states, including Delaware and North Carolina, require that corporations hold an annual meeting of the shareholders. The purpose of such a meeting is usually to elect directors for the upcoming year and ratify certain material decisions from the previous year. A corporation is generally free to hold such a “meeting” via a written consent action in accordance with state statute. There is no mandatory obligation in the Delaware or North Carolina statutes for a LLC to hold an annual meeting, however, it is good practice to do so nonetheless (via an actual meeting or via written consent action) in order to ensure that the LLC is operating in accordance with proper formalities. Companies that do not hold annual meetings of shareholders/members or properly keep a book of minutes or written consent actions open themselves up to plaintiffs and their lawyers arguing that the corporate veil of the company should be pierced, thus potentially making the owners personally liable for the debts and liabilities of the company (which is one of the primary reasons to form a company in the first place).
Annual Reports
Most states in the US require some sort of annual reporting from companies (50 state chart here). In Delaware, corporations are required to file an annual report and pay annual franchise taxes by March 1 of each year. Delaware LLCs are required to pay an annual tax by June 1 of each year but are not required to file an annual report. In North Carolina, corporations and LLCs are required to file an annual report on an annual basis. Corporations are required to file their annual reports to the Secretary of Revenue by the fifteenth day of the fourth month following the close of the corporation’s fiscal year. LLCs are required to file their annual reports by April 15th of each year. Professional corporations and non-profit corporations are not required to file annual reports in NC.
Beneficial Ownership Reporting – Corporate Transparency Act
A new addition this year following passage of the Corporate Transparency Act and implementation of final regulations, the federal government now mandates that all domestic and foreign entities registered to do business in the US, including corporations and LLCs, file a report of their beneficial ownership and certain other information with FinCen, unless they meet certain exemptions. Specific exemptions include certain tax-exempt entities and large operating companies, but other exemptions may also apply. Existing companies have until January 1, 2025 to make this report, while new companies have 90 days from their date of formation. Beneficial owners who must be identified in the filed report include any individuals who directly or indirectly exercise substantial control over the company or own or control at least 25% of the company’s ownership interests. Unless certain exemptions apply, beneficial owners must be reported as individuals, and parent entities are looked through to the ultimate individual owner(s). A compliance guide for small businesses is available here, but we highly recommend you reach out to your Michael Best attorney contact to determine whether and how the new reporting requirements apply to your company.