Sometimes a business falls into inactive standing with its state of incorporation.
It is possible for an LLC or corporation to lapse. The reasons may range from a check that bounces when trying to pay a filing fee to forgetting to meet an annual report deadline. As a result, the entity falls into bad standing. If no actions are taken to bring the entity back into good standing, the business may be dissolved through involuntary dissolution.
However, the good news is that hope is not lost for a dissolved business. It is possible to reinstate a business that has been involuntarily dissolved by its state of incorporation.
If it’s possible, should you reinstate your business? The answer to this question is yes. Let’s learn more about what it means to reinstate a small business.
What to Know Before Reinstating a Business
Prior to reinstatement, it’s important for business owners to understand what caused their business to fall into bad standing and be involuntarily dissolved.
A few examples are mentioned above that may be responsible for falling out of compliance. However, if you find you are still uncertain about what happened and why your business has been branded with a non-compliant mark it’s time to contact your local Secretary of State. Inquire into what happened and learn about the reason behind the dissolution. Once you figure out why you fell out of compliance, it will be easier to reinstate the business.
Tips for Reinstating a Small Business
Reinstating a small business requires doing a bit more than submitting reinstatement forms to the Secretary of State. You will also need to file the appropriate paperwork for the cause of why you fell into bad standing.
For example, let’s say you forgot to file your annual report in time. In addition to filing a reinstatement application, you would also need to file a delinquent form.
Each state has varying paperwork requirements for reinstatement purposes. This is true of both domestic and foreign entities, the latter of which may be required to follow separate guidelines for reinstatement. For example, some states may ask for a letter in lieu of a reinstatement application. Or, if changes were made to your business address, you may be asked to include a statement of change of the principal office and registered office.
Be sure to check in with your specific Secretary of State to get a full list of the forms you are expected to file on behalf of your business. Learn about the appropriate filing methods as well which may include filing online or through the mail.
Paperwork aside, make sure you pay the appropriate fees for reinstatement. There is a filing fee associated with your reinstatement application. In addition, any delinquent forms may require paying associated fees such as leftover or penalty fees. These fees vary from state to state, so be sure to set aside a bit of money that can cover these expenses.
Why It’s Good to Reinstate a Business
Some businesses are voluntarily dissolved. This means the owner chooses to dissolve the company, often for reasons that may range from wanting to start a new business to determining this company has run its course.
However, businesses that are involuntarily dissolved may see a reinstatement as a second chance to get back into business. They have a better understanding of what caused their company to lapse or fall into bad standing. This allows entrepreneurs to learn from this mistake, avoid making it again, and to better equip themselves for staying in compliance with the state hereafter.
Business owners can get back to doing what they love — and better understand how to stay in good standing.