What to do if your California Company is Suspended or Forfeited
April 21, 2013
In California, a company can be suspended or forfeited by the Secretary of State (SOS) or the the Franchise Tax Board (FTB). The SOS usually suspends a corporation for improper filing. This usually occurs due to the failure to file the required Statement of Information and, when applicable, the required Statement by Common Interest Development Association. Under California law, a business is required to file a Statement of Information ever every year, or every other year. For your convenience, the business is usually sends a reminder post card about three month prior to the due date. You are also usually sent a delinquency letter if you miss the deadline, giving you and additional sixty days to get the statement filed, before your business is suspended. While the state does attempt to remind you of your filing date, it is still your responsibility as the business owner to submit your paperwork on time, and whether or not you have received the reminders has no bearing on this responsibility.
The FTB usually suspends a business either because the business failed to file one or more tax returns or the business failed to pay its balance. This balance can include the penalty incurred by not not filing your Statement of Information in a timely manner. This means a SOS suspension can also cause an FTB. Your business may be suspended by either the SOS, the FTB or both. It is your responsibility to check with both agencies when you try to revive your business.
If your business is suspended, it is important to revive it as soon as possible. You lose a lot of rights while suspended which can negatively effect your ability to both revive your business and run your business once revived. During suspension, the business loses its rights, powers, and privileges to conduct business in California. The business also loses the right to use its business name in California. This means that another business could register with the suspended or forfeited business' name, and the name would then belong to the other business. This would require the original business owner to register a new business name before it can revive its business. The business cannot initiate lawsuits, defend itself against lawsuits, or enforce its legal contracts. But other parties can enforce their terms in these contracts. Also, if the business enters contracts while suspended or forfeited, it can never enforce those contracts unless it obtains relief of contract voidability.
There are three ways to revive your business, determined by your type of suspension. If your suspension is by the SOS only, your business can be revived by filing a current Statement of Information with this office. A common interest development corporation must also submit a Statement by Common Interest Development Association together with the Statement of Information. If your business is suspend by the FTB only, you must contact the Board directly to determine how to revive it. Of you are suspended by both the SOS and FTB, you should first file a current Statement of Information with the Secretary of State and obtain a letter of proposed relief from suspension or forfeiture. Once you receive the letter from the Secretary of State, the business entity should complete an Application for Certificate of Revivor and submit the application along with a copy of the proposed relief letter to the Franchise Tax Board. The business entity will remain suspended by the Secretary of State until both the Secretary of State and Franchise Tax Board revivor requirements have been met. Information regarding the type of suspension can be obtained by ordering a status report.
Reviving a company after suspension can become time consuming and expensive. If your company has been suspended, call our experienced attorney to help you navigate the process.