Why do I have to keep up with annual filing requirements for my company?

You have to keep up with annual filing requirements for your company because the consequences of not making the required filings can be substantial. For example, California requires that your company file a statement of information every year. If your company fails to file a statement of information on time, there is a $250 penalty. If the failure goes on for two years, then all of your company’s powers, rights, and privileges may be suspended. That includes the right to sue or defend a lawsuit and even to transact business “of any kind.” In that case, any contract made by your company is voidable by the other party to the contract, which can cost you a lot of money. In addition, it is a criminal offense, punishable by a fine of up to $1,000, or by a prison term of up to one year, or both, for you to attempt to exercise your company’s powers, rights, and privileges while it is suspended. In short, filing the statement of information every year, along with the $25 fee, might seem like a small nuisance, but it can turn into a really big headache. For more information, see our article addressing Why Is Completing Secretary of State Filings Important?