Filing returns is one of the core responsibilities carried out by corporate in-house legal teams and private law firms that provide services for businesses.
Business owners and legal professionals are very familiar with the premise of filing a standard annual return. However, there are several other types of returns that may need to be filed, depending on the circumstances surrounding the state of the business.
For instance, let’s say that a corporate entity acquired a new subsidiary that has recently been founded. In this scenario, the in-house legal team may be required to file an initial return since the subsidiary is a new business.
Conversely, if the corporate entity has acquired a subsidiary and plans to absorb it completely, the in-house legal team may need to file a final return. This document would signify the end of the subsidiary’s independent tax status and would then bring the newly absorbed company under the umbrella of the owning corporation.
Join us as we explore these types of returns in our Back to Basics series. We answer common questions such as “What is an initial return?” and “What is a final return?” Additionally, we examine how your legal team can streamline the process of filing initial, final, and annual returns by adopting entity management software.
What Is an Initial Return?
An initial return is precisely what it sounds like. This type of return is required when a company is initially created. Each jurisdiction sets its own requirements regarding the filing of initial returns. Some jurisdictions do not require initial returns to be filed at all.
In order to determine whether a jurisdiction requires initial returns, the legal team should consult the relevant corporate laws for that state. The statute will clearly explain:
- Whether an initial return is required
- How long the entity has to file the return
- The process for return submission
Failing to file an initial return when required can create quite a headache for business owners and their legal representatives. Inaction can lead to late fees, fines, or other civil penalties. The specific penalties for failing to file a return will vary by jurisdiction.
After the initial return is filed, the business will be required to file an “annual return” in subsequent years. Once again, adherence to these filing deadlines is critical so that businesses can avoid incurring fines or other penalties.
What Is a Final Return?
A final return is the exact opposite of an initial return. Final returns are required by some jurisdictions when a business is dissolving or being absorbed by another entity.
The final return contains much of the same information as an annual return. However, it also conveys to the governing body that the business will no longer be operating under its tax ID or doing business under its registered name.
As with initial returns, not all jurisdictions require final returns. Those that do have stringent requirements regarding what form must be used, when the final return has to be submitted, and what information is to be included.
What Is an Annual Return?
Annual returns are returns that must be filed after a company's first year of operations. These returns must be filed yearly unless the business is merging with another entity or dissolving. At that time, business leaders must file the aforementioned final return.
While filing returns is a basic function of in-house legal teams or law firms, completing these documents can be quite tedious. This reality is especially true if the legal team uses an antiquated entity management solution, such as on-premises software and manual record-keeping practices.
How Entity Management Software Can Simplify Return Filing
Cloud-based entity management software has the ability to revolutionize the way that legal teams conduct entity management. This leading-edge technology streamlines every facet of entity management, including the process of generating tax charts and filing returns.
Entity management software can also help alleviate many of the challenges associated with filing returns. Specifically, this technology can:
- Provide reminders for annual filings
- Use data to generate detailed tax charts and reports
- Facilitate e-signing and e-filing with government entities
- Increase the efficiency of the filing process
- Reduce the risk of filing mistakes
In addition, entity management software such as that provided by Athennian can assist with numerous other entity management processes.
Our technology makes it easier to document billable hours, track revenue, maintain transparency across all entities, and maximize the efficiency of legal teams. To ensure that Athennian’s technology remains at the forefront of entity management software, we publish weekly updates based on feedback from current users.
Would you like to learn more about the capabilities of our entity management software? If so, then we invite you to schedule a customized demo with one of our legal entity management experts. We look forward to showing you how our solutions can make your work easier.