Categories: Business Basics

Business Basics: Reinstatements

Reinstatement is what you have to do to get your business out of an inactive or bad standing with the state. And this time of the year, we’re getting tons of requests and questions about reinstatements from people who let their corporation or limited liability company to lapse, but want to get things rolling again before we get too far into 2015.
Luckily, the reinstatement process is pretty straight-forward, though depending on the reason for the lapse, it can get a little pricey.

How does a company become inactive, or get put in bad standing?
There are a few different ways this can happen. But one of the most common reasons behind a bad-standing is simply the business’s owner forgetting to pay their annual fee. Most states require corporations and LLCs to file an annual, or bi-annual, report, and send in a fee. If you forget to do that, your company can lapse into bad standing. Bounced checks or misplaced forms can also stick your company in bad standing, as can an unpaid tax bill.

How do you reinstate a corporation or LLC?
Most states offer either an application for reinstatement, or ask that a representative of the company write a letter requesting reinstatement. Along with filing that, you’ll have to rectify whatever problem caused the bad standing in the first place. Sometimes that just means paying a small fee, while other times that small fee can balloon with penalties and delinquency costs. Normally, the sooner you reinstate your business and get in compliance with the state, the better.

Why would you want to reinstate a business?
For the same reasons you formed a corporation or limited liability company in the first place. When you let your business structure lapse, it’s only a matter of time before the state dissolves the business, effectively removing all the protection and tax benefits that can come with incorporating, or forming an llc. Further, if you continue to operate and advertise as an LLC or corporation without actually being one, you could land yourself in hot water. That’s why the best thing you can do for your business is to keep up with your state fees and compliance requirements.

Interested in reinstating a company in bad-standing? Not sure what went wrong? Need help figuring out how to reinstateme? Just give us a call at 1-877-692-6772!

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.