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2020 – Suspended Corporation

2020 – Suspended Corporation

practice area: personal injuries law
date: August 21, 2018
outcome: found not guilty by the jury

Is Your California Corporation or LLC in Good Standing?

Donald W. Flaig, Esq.

You’ve recently learned that your business has been suspended and you’re left wondering what that means. There are several consequences to having your corporation suspended. First and foremost, your corporation loses its legal rights and privileges.  A suspended California Corporation is unable to sue or defend any activity in court. For example, your company will no longer be able to sue a client for non-payment on an invoice. Conversely, your corporation will be unable to defend itself should a customer sue for breach of contract.  In addition, as the owner of a suspended corporation, the protection the corporate entity provides against personal and family assets may be null and void. There are some commercial banks that will suspend credit lines and close bank accounts if they learn your Corporation has been suspended. In order to sell or merge the corporation, it must be in good standing.  Lastly, when your corporation is suspended, another corporation may reserve and/or take over the suspended corporations name.  Keeping the corporation in good standing is extremely important and is one of the basic duties of the corporate officers

Why was my California Corporation Suspended?

The California Secretary of State and/or The Franchise Tax Board (FTB) has the authority to suspend a California Corporation. Every Corporation registered with the California Secretary of State is required to file an annual Statement. The Secretary of State might declare your corporation out of “good standing” or suspend your business if your corporation fails to file its annual Statement of Information and pay the necessary fees. The Franchise Tax Board might suspend your corporation for failure to file annual tax returns and/or failure to pay the $800 annual Franchise Tax or any taxes owed. It’s important to note, that even if the California Corporation didn’t engage in a single business activity, the $800 minimum franchise tax is owed.

What is required to reinstate/revive my California Corporation?

In order to achieve “good standing” once again, a suspended California Corporation will need to be revived or reinstated. The specifics on how to reinstate the corporation depends on the reasons for suspension. If the Corporation was suspended by the Secretary of State for failing to file a Statement of Information, all past due documentation and fees will need to be submitted. Once completed, the Secretary of State will send a “Notice of Reviver” to the Corporation.

If the Corporation was suspended by the Franchise Tax Board, the Corporation will be reinstated after 1) all delinquent tax return and statements have been filed 2) all applicable taxes, penalties, interest, and fees have been paid 3) an application has been filed with the Franchise Tax Board. The FTB will then issue a “Notice of Reviver” once they have confirmed with the Secretary of State that the corporate name is still available. If it’s determined that the Corporate name is no longer available, you will be required to select a new corporate name and file amended Articles of Incorporation as part of the reviver process.

A suspended status can cause a myriad of issues for a California Corporation. To avoid suspension, all documentation and payments should be regularly filed with the Secretary of State and Franchise Tax Board. If you learn that your Corporation has been suspended it’s important to act quickly to restore its good standing. Should you find yourself in this situation, our firm is here to help!

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5707 Corsa Avenue Suite 104 Westlake Village, CA 91362
Mon - Fri: 9:00am - 5:00pm
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5707 Corsa Avenue Suite 104Westlake Village, CA 91362
Mon - Fri: 9:00 am - 6:00 pm

The Flaig Law Firm 2021. All Rights Reserved.

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Flaig Law Firm 2021. All Rights Reserved.