Connecticut Public Act 19-40: New Annual Report Filing Requirements

Connecticut requires all annual report filings for limited liability companies (domestic and foreign) to be filed every year with the Connecticut Secretary of the State’s Office (the “Secretary”) by March 31 and all annual report filings for corporations (profit or non-profit), limited liability partnerships and limited partnerships (domestic and foreign) to be filed every year with the Secretary on the last day of the anniversary month of its formation.  The Secretary has indicated that it will be a priority for 2020, and beyond, to maintain an accurate register of Connecticut businesses.[1]  An entity’s failure to file its annual report will result in the State administratively dissolving the entity.[2]  In furtherance of the Secretary’s goal of maintaining an accurate registry, last year the legislature enacted Public Act 19-40 (the “Act”).  The Act provides for a twelve-month grace period for an entity to file their annual report before the Secretary initiates the dissolution process.  

Prior to the Act, an entity had a very low risk of being dissolved for failing to file an annual report.  Dissolution for failing to file annual reports required the Secretary to send notices to non-filing entities by certified mail before they could be dissolved.  Unreported address changes coupled with the certified mailing requirement made it difficult and expensive for the Secretary to deliver these dissolution notices.  The Secretary, therefore, was not aggressive in pursuing the administrative dissolution of delinquent entities.

To help filers with timeliness, all annual reports must now be filed using the Secretary’s online portal.  This year, for the first time, filers will notice that annual reports require the inclusion of the North American Industry Classification System (NAICS) code affiliated with the business activity of the entity.[3]  Entities failing to include an NAICS code in the annual report will have their submission rejected by the online system.   In furtherance of the Secretary’s desire to maintain an accurate registry of Connecticut business, the NAICS code requirement provides the state with a yearly snapshot of the types of businesses operating in Connecticut.[4]  

If your entity has filed tax returns in the past, then you may find the NAICS code most recently attributed to your business by reviewing your prior year’s tax return.  If the nature of the business has substantially changed, and you need to change your NAICS code, the U.S. Census Bureau provides a PDF manual on how to select the appropriate industry code at https://www.census.gov/eos/www/naics/.  Codes are generally organized in a hierarchical classification system, offering five levels of detail.  Each digit is part of a progressively narrower category.  The first two digits designate the economic sector, the third digit designates the subsector, the fourth designates the industry group, the fifth designates the NAICS industry, and the sixth digit designates the national industry.  A complete and valid NAICS code will have six digits.[5]  The Secretary, in collaboration with the CTData Collaborative created a tool to assist Connecticut businesses with this new filing requirement, available at https://naics.ctdata.org/.  To use this tool most effectively, the user should have a general understanding of the business and should use general descriptive terms in the search tool, (e.g. “law” for “Offices of Lawyers”).

Aside from the State requirements, the United States Census Bureau’s website for small businesses, specifically identifies other federal agencies, including the Internal Revenue Service (the “IRS”), which use NAICS codes.  Because the NAICS classification system categorizes entity type, as well as size; failure to accurately classify your business with the correct code may impact an entity’s ability to apply for government contracts (i.e. size restricted contracts intended for small business) or can inadvertently create red-flags with the IRS (i.e. too much revenue for the type of business triggering a potential audit).  Business owners should learn to appropriately identify their business within the system to prevent inaccurate NAICS filings and the negative consequences as a result thereof.

If you have any questions or concerns regarding Connecticut’s new annual filing requirements, please do not hesitate to contact the attorneys at Pullman & Comley, LLC.

[1] https://www.cga.ct.gov/2019/act/pa/pdf/2019PA-00040-R00SB-01083-PA.pdf

[2] Id. at 9.

[3] Id. at 1.

[4]https://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=SB01083&which_year=2019#

[5] https://www.census.gov/eos/www/naics/faqs/faqs.html#q1