Illinois Corporation Not in Good Standing: Everything You Need to Know
Illinois corporation not in good standing refers to a corporation in the state of Illinois that has failed to comply with the state's requirements for reporting and paying fees.3 min read
Updated October 28, 2020:
Illinois corporation not in good standing refers to a corporation in the state of Illinois that has failed to comply with the state's requirements for reporting and paying fees.
When business owners elect to create an LLP, corporation, or LLC, they need to file the correct formation papers with their state. If a business owner wants to do business in a state other than their home state, they will also need to file the formation papers with these states.
The state will then grant the corporation the right to conduct business. The corporation will become a statutory business entity and will enjoy all of the advantages that this entails.
In order to maintain this right to conduct business, the business will become subject to a number of business laws and requirements.
Some examples of these business rights and requirements include the following:
- Appointing a registered agent
- Paying franchise taxes and fees
- Filing required forms in a timely manner
A business is considered to be in good standing for the records of the state as long as the business is in compliance with these requirements. Being in good standing allows the business to keep their rights and privileges as a business that is considered a statutory entity.
However, if an entity doesn't remain in compliance with its various obligations, the entity can lose their good standing status. The business will then be considered suspended, delinquent, dissolved, or void.
Both the severity and meaning of these terms differ from state to state. The duration of the lack of compliance and which compliance requirements were not met also have an impact on the severity and meaning of these terms.
In almost every state, corporations are required to file annual reports that provide information about the continued activity of the corporation and the corporation itself.
The content of the annual report differs from state to state. However, the purpose of the annual report is usually the same — to make sure that the corporation is active and has paid the fees necessary to the state.
If a corporation doesn't file the annual report in a timely manner, it could lose its good standing with the state. There are serious consequences that a corporation or any other entity could face for not being in good standing with the state
One potential consequence is the personal liability of the owners of the corporation that is not in good standing.
Even if the corporation resolves the issue so that the corporation is in good standing with the state, a disgruntled party could use this short period of time of not being in good standing against the corporation when filing a lawsuit. The disgruntled party could sue the owners of the corporation.
Another consequence of a corporation not being in good standing is the fees and penalties from the failure to file the annual report in a timely manner.
Yet another consequence is a result of anyone being able to check the status of a corporation in real-time on the Internet. The vast majority of states have websites where people can check the status of a corporation.
This means that competitors, business partners, and attorneys who are curious about the status of your corporation can check it by searching the online database of the state.
In a recent case in which an organization failed to file its annual report with the state of Illinois on time, this consequence reared its head. Illinois is one of the many states that updates its database regarding the status of corporations immediately. Therefore, the database indicated that the company was not in good standing with the state for a brief period of time.
The company didn't owe too much money to the state and the company was only late in filing the report by a few days. However, while the company was not in good standing with the state, a business partner had noticed by checking the state's database. This caused the business partner to suspend its transaction with the said company until the company was able to obtain a status of good standing with the state.
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