We have talked a little bit about the different reports that the state requires corporations and limited liability companies to file, but what happens if you forget to send your annual report in? Or what if you find that you simply don’t have the money to pay for the franchise board tax, or the filing fees associated with all of that regulatory paperwork ? Well, you may find your business placed in ‘bad standing,’ branded with a non-compliant mark and, if you don’t take any action to get back into good standing, your business could be involuntary dissolved. Over the years we have talked to a few business owners who were forced through the dissolution process, and often one of the first questions they ask is ‘how do I reinstate my business after dissolution?’ Luckily it is usually a straight-forward process, though it can get a bit expensive.
Step 1: Figure out why you fell out of compliance
Most of the time you know exactly why you fell out of compliance – an errant annual report, a misplaced notice from the government, a bounced check that was never replaced. However, if you genuinely have no idea why you fell out of compliance, you can contact your state’s secretary of state, or department of corporations, if your state has one, and simply ask why. Of course, if you don’t want to deal with the wonderful world of government bureaucracy, we are always happy to help identify the problem!
Step 2: Submit reinstatement forms to the state
After you figure out why your LLC or Corporation was dissolved, you need to find out what paperwork you need to send in to get back into good standing. If you merely forgot to file your annual report, the only paperwork you’ll probably have to file is the delinquent form and an application for reinstatement. Some states ask for a letter in lieu of the application though, so if/when you talk to your secretary of state, make sure you ask them to list all of the forms that you need to fill out.
Step 3: Pay all outstanding fees
This is probably the worse step of them all, depending on the state you do business in. Some make the reinstatement process pretty cheap – for example Montana, if a business fell out of good standing because it failed to file its annual report, simply asks for a $30-35 filing fee for the reinstatement, plus $30 dollars per delinquent annual report. California, on the other hand, will hit you with a $250 penalty on top of any other filing fees. It is a good idea to set aside a few hundred dollars for the reinstatement process no matter what state you are in, just so you know you can cover all of the necessary costs before starting. And, again, the office of your state’s secretary or its department of corporations should be able to give you a good idea about how much money you will owe.
Having your limited liability company or corporation dissolved by the state effectively ends the legal and fiscal protection that an LLC or corporation can provide, so you really want to have the business reinstated as soon as possible. Also, if you neglected to pay franchise tax, note that the state will continue to hound you and your business if they feel they are owed money, and penalties will accrue if you don’t send that money in. It is best, then, to simply bite the bullet, write out the check, and file the paperwork. That way you can focus on running your business and getting everything back up to speed.