New Annual Report Filing for PA Entities: What Should Businesses Consider?
As businesses, medical practices, nonprofit entities and other organizations begin working toward their 2024 goals, nearly all that operate through entities organized under Pennsylvania Law (as well as foreign entities registered to do business within the Commonwealth[1]) should remain mindful that a new annual report (the “Annual Report”) filing requirement took effect Jan. 3, 2024.[2] The Annual Report replaces the Commonwealth’s Decennial Filing Report.
We provide a “refresher” on Act 122 of 2022 as it pertains to the Annual Report requirements, and a brief analysis of considerations for businesses that will be subject to the Annual Report requirement.
Background and Requirements
Although the requirement for an entity to file an Annual Report does not begin until “the calendar year after which an entity … first becomes subject to”[3] the Annual Report requirement, meaning next year for most entities[4], businesses should nevertheless become familiar with the new reporting requirements.
The Annual Report must be filed by the following types of Pennsylvania entities:
- business corporations
- nonprofit corporations
- limited liability companies (“LLCs”)
- limited liability (general) partnerships (“LLPs”)
- electing partnerships that are not limited partnerships
- limited partnerships (including limited liability limited partnerships) (“LPs”)
- professional associations
Additionally, all “registered foreign associations” that are registered to do business within the Commonwealth must file an Annual Report. By definition, this includes[5] foreign corporations (both business corporations and nonprofit corporations), partnerships, limited liability companies and business and statutory trusts.
The Annual Report must contain the following information:
- business name
- jurisdiction of formation
- registered office address
- name of at least one “governor,” which includes directors, members, managers and partners, depending on the type of entity
- names and titles of the principal officers, if any, as determined by the entity’s “governors”
- address of the business’s principal office
- entity number issued by the Pennsylvania Department of State
The fee to file an Annual Report is $7 for corporations, LLCs, LPs and LLPs, with no fee for nonprofit corporations and any LPs or LLCs operated consistent with a not-for-profit purpose.
The Annual Report deadline applicable to an organization is based on the entity type:[6]
- For corporations (both business and nonprofit, both domestic and foreign), the deadline is June 30
- For LLCs (both domestic and foreign), the deadline is Sept. 30
- For any other type of entity listed above, the deadline is Dec. 31
Beginning in 2027, if an entity that is required to file an Annual Report fails to do so, it will be subject to administrative dissolution, administrative cancellation or administrative termination of registration six months after the expiration of its applicable filing deadline. “Should a domestic filing entity discover that it has failed to make a required annual report and has been dissolved or terminated, it has the opportunity for reinstatement, with no limitation on the period of time for such reinstatement.”
However, if the Commonwealth effects an administrative dissolution, termination or cancellation, the name of the entity subject to such action is “made available to any other [entity]. If another [entity] has taken the name of the [entity now] seeking reinstatement, the [entity] that has appropriated the name may keep the name and the [entity] seeking reinstatement … or reregistration …must choose a new name.”
Analysis
Although the thought of an Annual Reporting requirement is, in a vacuum, benign, businesses would be wise to review the above requirements and consider a few practical implications, including:
- Calendaring the Annual Report Deadline and Assigning Responsibility for Filing: Sounds simple enough, right? However, losing sight of the new Annual Report requirement can create inconvenience for a business in the future. For instance, if an organization is working to secure financing, a Subsistence Certificate (commonly referred to as a Certificate of Good Standing) from the Commonwealth is required to close. However, an entity could theoretically be issued a Subsistence Certificate that reflects a failure to file its Annual Report. A lender may refuse to “close over” this issue, which would necessitate the company filing an Annual Report nearly immediately, adding another ancillary item to an already hectic closing process – a scenario that could be avoided by designating a particular person to address the Annual Report now.
- Determining the Substance of the Annual Report: The substantive requirements of the Annual Report require a bit more information than businesses are accustomed to disclosing. Accordingly, key stakeholders should address which names will be placed on the Annual Report as “governor” and “principal officers.” Certain stakeholders, such as passive investors or “silent partners,” may want to avoid placing their names in publicly available materials. Principals of an organization should, at the least, begin considering the names (or positions) that it desires to disclose.
[4] Since the Annual Report requirement did not become effective until 2024, calendar year 2025 is when applicable entities must first file in accordance with the deadlines referenced in this article.
[5] See 15 Pa.C.S. § 102(a) for definition of “association.”
[6] Per the Pennsylvania Department of State, the Department “will mail notice to the registered office address … at least two months prior to the respective deadline, reminding it of the need to make an annual report.” However, a failure to receive such notice does not forgive a business’s failure to file an Annual Report.
