How to Reinstate a Dissolved Corporation in California?
Knowing how to reinstate a dissolved corporation in California allows a delinquent business to return to a good standing.3 min read
2. How to Reinstate or Revive a Forfeited Foreign Corporation in California
3. New California Law Governing Dissolution of Inactive California Nonprofit Corporations
Updated November 11, 2020:
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.
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.
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.
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