New PA Reporting Requirements for Businesses
December 12, 2022
Pennsylvania has been for many years one of the few states that has not required businesses organized under its laws to file an annual report evidencing its continued existence. Instead, Pennsylvania has long relied on a decennial report, leaving a substantial amount of doubt as to whether any particular business operating in Pennsylvania still has its doors open. This is all set to change with Governor Wolf’s signing of Act 122 on November 3rd.
Act 122 amends the Pennsylvania Business Corporation Law of 1988 (BCL), 15 Pa.C.S. Sec. 101, et seq., of the Pennsylvania Consolidated Statutes which deals with corporate and noncorporate entities and associations. This amendment created § 146 explaining the who, what, and when of the new annual PA reporting requirements. We’ll start out of order to give the good news first. While Act 122 was signed this year, the Pennsylvania legislature was wise enough to give businesses time to adjust to the new reporting requirements. No annual report is required to be filed in 2023, instead businesses must begin filing annual reports in 2024 with deadlines based on the type of entity making the filing. Corporations must file by July 1st, limited liability companies by October 1st, and all other entities by end of the calendar year. The Department of State is required to send notice of the filing deadline at least two months prior, but it is important to note that its failure to send or a business’s failure to receive the notice does not excuse a failure to file.
The entities required to file these new annual reports are the following: corporations (for-profit and not-for-profit), limited liability companies, limited partnerships, business trusts, domestic limited liability partnerships, domestic electing partnerships, and registered foreign associations. What is needed for filing the report is simple and straightforward. The annual report will be very similar to the decennial report and requires (1) the name of the entity and jurisdiction in which the entity was formed, (2) the registered office address, (3) at least one named “governor,” who is a person with management responsibilities, (4) names and titles of principal officers, (5) the address of the principal office wherever located, and (6) the entity number issued by the Pennsylvania Department of State. It should be noted that an entity or association can use the annual filing to change its registered office rather than use the other procedures outlined in the BCL.
Consequences for a failure to file the annual report can be very significant. If an entity fails to file the annual report within 6 months of its reporting deadline, the Department of State may initiate proceedings to either administratively dissolve the entity (for corporations, LLCs, and limited partnerships), or cancel the registration (for limited liability or electing partnerships). If an entity is dissolved it may only engage in activities necessary to wind up and liquidate. If an entity has its Pennsylvania registration canceled, it can continue to do business, but it will lose its limited liability protection. Fortunately, the Act provides for both a grace period and reinstatement. To provide an adjustment period to businesses, the state legislature created a 3-year grace period which prohibits the Department of State from initiating any proceedings for dissolution or cancellation of registration until 2027. This effectively gives businesses 3 years to make filing the annual report a natural part of the business’ yearly operations. The Act also grants any business entity the right to file for reinstatement should it fail to file the report and be administratively dissolved or have its registration cancelled. A business entity can file for reinstatement at any time and will have its dissolution or cancellation reversed retroactively. However, if during the interim time between administrative dissolution/cancellation and filing for reinstatement, another entity is formed and registers with the name of the dissolved/cancelled business, the name will be lost to the new filer.
Act 122 places an increased reporting burden on businesses operating in Pennsylvania. While the law provides a year for businesses to learn of the new reporting requirement and a 3-year grace period for businesses to fail to file without issue, the consequences for a failure to file after 2026 can have serious repercussions. Dissolution and cancellation can open businesses up to substantial liability due to the loss of limited liability protections and the potentially more destructive consequence of having to rename a business should a new entity poach the name before reinstatement. While all of this can seem daunting, our team of corporate and business attorneys are well versed in federal, state, and local reporting requirements and can assist in meeting the requirements so you can focus on the more crucial matter of running your business. If you would like to hear more about changes affecting businesses in Pennsylvania, contact us online and make sure to check our website frequently for new postings.