Here's my take on the OP question. An annual inspection is just an inspection and it is good for one year. The annual is a snapshot in time. An aircraft has to have been inspected within the previous 12 months for it to be legal to fly provided it is airworthy at the time of the flight. The A&P with IA that signs the logbook either finds the aircraft is airworthy or he gives the owner a list of discrepancies that he considers unairworthy. The inspection is complete either way and is good for one year. If the inspection was completed one month after the previous annual, the aircraft will need an inspection after the twelve months of the latest inspection has expired--the previous annual is rendered moot. In order for the aircraft to be legally flown it has to be "airworthy." Whether a discrepancy that makes an aircraft unairworthy is noted during an annual, a 100 hour, a prebuy, or during a preflight, the second an owner/operator is made aware of the existence of a discrepancy that renders an aircraft unairworthy, the aircraft is illegal to operate. Fix the discrepancy(ies) log the actions taken, and the aircraft is considered airworthy when an authorized person signs the return to service. For a standard category aircraft to be legally airworthy it has to conform to its type certificate or be in a properly altered condition (eg STCs) AND be in a safe condition for flight. Experimentals don't get annual inspections because they have no type certificate to conform to so they can't be "airworthy" in the legal sense, Instead, an experimental aircraft gets "condition" inspection to check that it is in a safe condition for flight. An A&P does not "ground" unairworthy aircraft. Unairworthy discrepancies "ground" an aircraft. It's the owner/operator's responsibility to resolve unairworthy discrepancies and have the aircraft returned to service by someone authorized to do so,