Many states require that homeowner associations organized as non-profit corporations file an Annual Report with the Secretary of State. The purpose is so that important information such as Registered Agent, Registered Office, and Officers for the corporation is maintained by the state, that franchise taxes and other fees have been paid, and that the corporation is in ‘Good Standing’ to do business in that state.
It is not unusual for associations to overlook submitting annual reports. It frequently occurs when developers transition the association to the resident elected board. It may also occur when there is a change in the management company or when new directors and officers are elected.
The consequences of not filing an annual report with the Secretary of State can include a change in corporate status to inactive, delinquent, administrative dissolution or loss of good standing. For clarification, dissolution does not mean the corporation has ceased its existence nor does it terminate the authority of the corporation’s registered agent. Fortunately, restoring Good Standing status can generally be remedied by filing an updated annual report and paying late fees or fines. Having a current annual report also ensures that the corporation can receive Service of Process in the event of lawsuits, tax notices and other official communication.
Despite the fact that some states do not require nonprofit corporations to file an annual report, it is considered best practice to do so. Some states have different guidelines for ‘corporations’ versus ‘non-profit’ corporations. The fees are typically in the $25-$50 range. Most annual reports can be submitted on-line with options to pay by credit card or by mailing the form and a check. The deadlines for filing also vary by state.
The responsibility for submitting an updated annual report usually rests with the association secretary and is fairly simple:
- You will need the legal incorporated name of the association. The legal name can be found on the association’s Articles of Incorporation or the Covenants.
- Begin with an online search using the keyword phrase “your state corporation search”. For example: “North Carolina Corporation Search”.
- Look for an option to search for your association based on the legal incorporated name.
- The corporate information about your association will indicate if the status is active or in good standing.
- If your association’s status is not in Good Standing, the Secretary of State website will have instructions and contact information to assist you in submitting the annual report and payment of fees.