Key Takeaways

  • A corporation can exist indefinitely unless its articles of incorporation specify a limited duration.
  • Proper compliance with state annual reports and tax obligations is crucial to maintain a corporation's good standing.
  • Corporations can extend a predetermined lifespan under specific statutory rules, but only within certain timeframes.
  • Dissolution requires a formal filing process and may include paying outstanding fees and taxes.
  • Factors like governance resilience, succession planning, and adaptability also impact a corporation's long-term survival.

How long can a corporation exist? This can be established by the articles of incorporation, the founding documents that establish your business with the state as a separate legal entity. If no fixed term for the corporation is established, it will exist in perpetuity provided it remains in good standing.

Characteristics of a Corporation

Corporations issue stock to investors, who then have an ownership stake in the company. Corporations are governed by the laws in the states where they are established. The formation documents are basically the same although they may be called either a charter or certificate of incorporation instead of articles of incorporation. Because a corporation is a legal entity separate from its owners, it continues to exist even when owners die or leave the business.

If the formation documents don't limit the corporation's term of existence, it will remain in existence until articles of dissolution are filed with the state. In some states, you might need to note the corporation's perpetual existence in the articles of incorporation.

Restrictive language can be added to the articles of incorporation that establish the business only for a certain purpose with a limited time frame. You can set a date on which the corporation will begin to wrap up its affairs. On that date, the business will cease to exist and must be dissolved unless the charter is later changed by director/shareholder vote.

Many states require annual reports and filing fees from corporations. Failure to follow these requirements can result in revocation of the corporate registration. This is the case in Maryland, for example. Although you can allow your corporation to become inactive by ceasing business activities or missing required filings, you may still be responsible for annual fees if you do not follow proper dissolution procedures. In addition, your business must continue to file federal and state income taxes until you officially dissolve. Depending on the state, you may be required to pay minimum taxes even if you aren't doing business, as well as fees for inactivity in some cases.

The corporate structure limits each owner's personal liability to his or her investment of the company. The corporation is considered a separate legal entity from its owner or owners.

Factors That Influence a Corporation’s Longevity

While the default corporation lifespan is perpetual unless otherwise specified, several factors can impact how long a corporation thrives:

  • Governance Strength: Strong corporate governance with a capable board of directors helps businesses navigate challenges and remain compliant with legal requirements.
  • Succession Planning: Effective planning for leadership transitions ensures business continuity after ownership or management changes.
  • Financial Health: Maintaining a healthy balance sheet, managing liabilities, and ensuring profitability contribute significantly to a corporation's survival.
  • Adaptability: Corporations that can pivot with market trends, embrace innovation, and respond to regulatory changes are better positioned for long-term success​.
  • Brand Reputation: Strong brand loyalty and trust in the marketplace make corporations more resilient during crises.

Forming a Corporation

  • In addition to filing articles of incorporation with the secretary of state, you may need to issue stock certificates and/or appoint a board of directors depending on state laws.
  • Obtain state and local business licenses and permits.
  • Register with the IRS for a tax identification number (EIN).

Maintaining a Corporation’s Good Standing

Once a corporation is formed, it must meet ongoing obligations to preserve its legal status:

  • Annual Reports: Many states require corporations to file annual or biennial reports updating their business information.
  • State Fees: Filing fees or franchise taxes must be paid regularly to avoid penalties or administrative dissolution.
  • Registered Agent: Corporations must continuously maintain a registered agent to receive legal and government notices.
  • Corporate Records: Corporations must keep accurate records of shareholder meetings, board resolutions, and financial transactions.

Failure to comply with these requirements can result in penalties, fines, or even involuntary dissolution by the state​.

Dissolving a Corporation

In most states, you can dissolve your corporation by filing articles of dissolution. Some states require you to place an ad announcing the dissolution in a specific publication. You must also resolve all corporate fees, taxes, and debts. Then, leftover assets can be distributed among the shareholders. You should consult an attorney when dissolving your business since the process can be complicated.

What Happens if a Corporation Is Not Properly Dissolved?

If a corporation ceases operations without properly filing dissolution documents:

  • Continued Tax Liability: The corporation may still owe taxes and fees until it is officially dissolved.
  • Administrative Dissolution: The state may eventually dissolve the corporation for noncompliance, but this can result in additional fines and penalties.
  • Legal Exposure: Former directors, officers, or shareholders could potentially face liability for unresolved debts or obligations.

To avoid these issues, corporations should follow formal dissolution procedures, including notifying creditors and filing necessary final tax returns​.

Related Common and Case Law

The Corporation Code, which was established in 1980, allows corporations to exist for 50 years from the incorporation date. This can be extended by 50 years at a time by amending the articles of incorporation. This can be done within five years of the original expiration date.

Not only can you not extend the company's expiration date before that five-year window, but you also cannot do so once the expiration date has passed. A 2016 SEC opinion prevented a corporation founded in 1962 from renewing its lifespan, although the business argued that the term should be counted not from the incorporation date but from the passage of the Corporation Code. The SEC countered that the 50-year term requirements existed before the code took effect in May 1980. However, educational companies (as opposed to stock corporations) use May 1, 1980, as the date to begin the 50-year term if they were established before that date.

In the case of Western Branch v. Trust Company, the court found that the bank was established by charter and existed before it had stockholders, so it does not cease to exist when stock shares transferred to new ownership. The corporation remains intact during this interval.

Extending a Corporation’s Duration

Some jurisdictions set an initial limited term for corporations. For example, under certain corporate codes, a corporation may be formed for a term of 50 years, renewable for another 50 years through amendment of the articles of incorporation. Important points about term extension include:

  • Timely Renewal: Extensions must be completed within a specified window (e.g., within five years before the expiration date).
  • Failure to Renew: Missing the extension window could permanently terminate the corporation's legal existence.
  • Special Rules for Certain Entities: Educational corporations and other non-stock corporations may have different rules regarding the calculation of their 50-year term​

Frequently Asked Questions

  1. How long can a corporation exist without dissolution?

    If no expiration date is listed in the articles of incorporation, a corporation can exist indefinitely, provided it complies with all legal and regulatory obligations.

  2. What happens if a corporation fails to file annual reports?

    Failure to file required reports and pay associated fees can lead to administrative dissolution by the state and potential penalties.

  3. Can a corporation's lifespan be extended?

    Yes, corporations formed with a limited term can usually extend their lifespan by amending their articles of incorporation within a specific time window before expiration.

  4. What factors help a corporation last longer?

    Strong governance, succession planning, financial health, market adaptability, and brand reputation are key factors that support a long corporation lifespan.

  5. What is administrative dissolution?

    Administrative dissolution occurs when a state revokes a corporation’s status due to noncompliance, such as failure to file reports or pay required fees.

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