Key Takeaways

  • Reinstating a dissolved corporation in California is crucial for restoring legal standing and business operations.
  • The process varies based on whether the dissolution was voluntary or involuntary, and whether it was caused by the Secretary of State or the Franchise Tax Board.
  • Steps include determining the cause of dissolution, filing reinstatement paperwork, and paying outstanding taxes and fees.
  • A Certificate of Revivor is required to regain good standing with the California Franchise Tax Board.
  • Failure to reinstate a dissolved corporation can result in legal liabilities and penalties.
  • California nonprofits can take advantage of AB 557 to dissolve inactive organizations efficiently.
  • Hiring an attorney can streamline the process and ensure compliance.

Knowing how to reinstate a dissolved corporation in California allows a delinquent business to return to a good standing. If a corporation in California becomes suspended, it loses all its privileges and rights, becoming unable to operate legally. While suspended, a business cannot:

  • Conduct any activity related to the business.
  • Collect payment for goods or services.
  • Bring about or defend a court action.
  • Have its doors open for business.

In order to return to good standing, a suspended corporation in California must be reinstated or revived.

Reinstating Your California Business After a Dissolution

If the state dissolves your corporation or limited liability company, the fiscal and legal protection that this classification provides also ends. You may face or experience various fines, various fees, and penalties for being non-compliant. In addition, business owners may be held personally liable. Transactions with licensing and government agencies, contractors, and banks may also be delayed, hurting the credibility of your business. In addition, if you have not paid, franchise tax penalties will continue to accrue until the paperwork is submitted and fees are paid.

Many states have a time frame for restoring your business, which is important to take advantage of by following the steps below:

  • Determine the reason for noncompliance: A business is often aware of why it is no longer in compliance, but if you do not know the reason, you should contact the secretary of state to find out why.
  • File state reinstatement forms: Identify the paperwork required to rectify the reasons you are non-compliant. Your secretary of state will be able to assist you in determining what needs to be sent in.
  • Pay any outstanding fees: You will need to ask your secretary of state what fees are associated with getting reinstated. Some states simply require a filing fee while others also include a penalty. Generally speaking, reinstatement can cost anywhere from $30 to $300, depending on your state.

Step-by-Step Guide to Reinstatement

Reinstating a corporation in California involves several essential steps:

  1. Determine the Reason for Suspension:
    • Check records from the Secretary of State or Franchise Tax Board.
    • Identify missing filings, unpaid fees, or compliance issues.
  2. Resolve Outstanding Tax Liabilities:
    • Contact the California Franchise Tax Board to settle unpaid taxes.
    • Submit all delinquent tax returns.
  3. File the Required Forms:
    • For Secretary of State suspensions, submit a Statement of Information.
    • For Franchise Tax Board suspensions, file an Application for Certificate of Revivor.
  4. Pay Reinstatement Fees:
    • Fees vary based on the length of dissolution and the reason for suspension.
    • Some businesses may qualify for fee waivers in certain circumstances.
  5. Obtain a Certificate of Status:
    • Once reinstated, request a Certificate of Status to confirm good standing.
  6. Resume Business Operations:
    • Ensure compliance with local, state, and federal regulations.
    • Update business licenses, contracts, and bank accounts.

Completing these steps in a timely manner can prevent further legal and financial complications.

Consequences of Not Reinstating a Dissolved Corporation

Failing to reinstate a dissolved corporation can lead to significant legal and financial consequences. Some key risks include:

  • Loss of Limited Liability Protection: Business owners may be held personally liable for debts and lawsuits.
  • Inability to Enter Contracts: A dissolved business cannot legally enter new contracts or enforce existing ones.
  • Accumulation of Fees and Penalties: Unpaid taxes and penalties continue to accrue, increasing financial burdens.
  • Loss of Business Name: If the corporation remains dissolved for too long, its name may become available for others to register.
  • Reputational Damage: Business relationships with clients, vendors, and banks may suffer due to a lack of good standing.

If reinstatement is delayed, the corporation may have to form a new entity rather than simply reviving the old one.

How to Reinstate or Revive a Forfeited Foreign Corporation in California

To reinstate a foreign corporation in California, you will need to determine the suspension date and which agencies made the forfeiture request. Either the secretary of state or the Franchise Tax Board can forfeit a corporation. Therefore, it is important to determine which agency is involved, as each has its own procedures for reinstatement.

  • Secretary of State: You will need to complete a new Statement of Information as well as documentation that the foreign corporation is compliant in the original state of formation. You may also need to amend your articles of incorporation to change your status from forfeited to active.
  • California Franchise Tax Board: Someone from the corporation will need to contact the Franchise Tax Board to determine all necessary actions required to reactivate your good standing status. If trying to complete the action from another state, this can take up to three to six months due to documents being processed via mail or online. Enlisting the help of a local professional can expedite the process significantly.

Once a Certificate of Revivor is received and your business is again in good status, you can request a Certificate of Status from the secretary of state. Reinstatement is generally granted "without prejudice to any action, defense, or right which has accrued" during the corporation's suspension.

Common Reasons for Business Dissolution

Businesses in California may be dissolved for several reasons, including:

  • Failure to Pay Taxes: Delinquent tax payments result in automatic suspension.
  • Non-Filing of Required Documents: Missing annual reports or statements of information can lead to dissolution.
  • Failure to Maintain a Registered Agent: Every corporation must have a registered agent for legal correspondence.
  • Court-Ordered Dissolution: Legal disputes or regulatory violations may force dissolution.
  • Voluntary Dissolution: Businesses may choose to dissolve due to financial or strategic reasons.

Understanding these causes can help prevent dissolution and ensure continued compliance with state regulations.

New California Law Governing Dissolution of Inactive California Nonprofit Corporations

Starting January 1, 2016, nonprofit corporations that are inactive and meet the eligibility requirements for dissolution under AB 557 may voluntarily or administratively be dissolved by state authorities with the possibility of prior year state franchise tax, penalties, and interest abated.

In order for a California nonprofit to dissolve, it must first become active and be in good standing. This means all taxes, fees, and interest from previous years must be paid. Many nonprofits do not have the required funds to do this, so they become abandoned, staying on the books for the secretary of state and Franchise Tax Board.

This law hopes to create a streamlined process to dissolve those nonprofit corporations whose tax-exempt status is either suspended or forfeited, ensuring these corporations are unable to conduct business in California.

Special Considerations for Nonprofit Reinstatement

Nonprofit corporations seeking reinstatement must meet additional compliance requirements:

  • Reestablish Tax-Exempt Status: If revoked, nonprofits must reapply for tax exemption with the IRS and California Franchise Tax Board.
  • Settle Past Obligations: Any outstanding fees, penalties, or unfiled returns must be addressed.
  • File Articles of Incorporation: If dissolution was involuntary, new articles may be required.
  • Obtain Attorney General Approval: Nonprofits must notify the California Attorney General before reinstatement.

Due to these complexities, legal assistance is often recommended to navigate the reinstatement process smoothly.

Frequently Asked Questions

  1. How long does it take to reinstate a dissolved corporation in California?
    The process typically takes a few weeks to a few months, depending on the reason for dissolution and how quickly required documents and fees are submitted.
  2. Can I reinstate a corporation if it has been dissolved for several years?
    Yes, but you may need to pay all back taxes, penalties, and filing fees. In some cases, forming a new corporation may be more cost-effective.
  3. What is the difference between a Secretary of State suspension and a Franchise Tax Board suspension?
    A Secretary of State suspension occurs due to missing corporate filings, while a Franchise Tax Board suspension results from unpaid taxes.
  4. How much does it cost to reinstate a corporation in California?
    Reinstatement fees vary but can range from $100 to several hundred dollars, depending on penalties and back taxes owed.
  5. Do I need an attorney to reinstate my corporation?
    While not required, legal assistance can help ensure compliance and expedite the process, especially if complex tax or legal issues are involved.

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