Reviving Your San Diego Corporation
We recently published an article about the importance of paying your franchise tax to the California Franchise Tax Board. Basically, paying your taxes is important to make sure your corporation does not get suspended. A corporation is a legal entity that has a separate and independent legal existence apart from its owners. Unlike people, a corporation’s existence can be suspended. If that has happened to your San Diego or California corporation, you should seek the advice and counsel of a skilled and experienced business attorney. Here is what you need to know about reviving your corporation’s legal existence.
San Diego Corporate Law: Legal Principles
When a San Diego corporation is suspended, under California law, the corporation can no longer operate or do anything. The corporation is considered NOT in good standing and has lost all rights and privileges. For example, the corporation cannot enter into legally binding contracts, and cannot defend or prosecute a lawsuit.
San Diego Corporate Law: Reasons Why a California Corporation is Suspended
The method of reviving or reinstating a suspended corporation depends on the reason(s) why the corporation was suspended. Essentially, you must correct whatever the owners of the corporation have “done wrong.” There are three common reasons why a corporation can be suspended. They are:
- Failure to file its annual Statement of Information with the California Secretary of State’s office
- Failure to file its annual tax return with the California Franchise Tax Board (“CFTB”)
- Failure to pay its annual taxes to the CFTB
All three requirements are yearly and all three must be completed even if the corporation did not engage in any business during the year. There is, for example, an annual minimum tax of $800 even if your corporation did not sell anything or make any money.
To revive your suspended San Diego Corporation, you must “fix” one or all of these failings. If you have failed to file and/or pay for multiple years, then you must “come current” for all the missing years.
San Diego Corporate Law: Filing to Revive
The California Secretary of State will allow you to file your corporate annual Statement(s) late with a payment of a late fee ($250). If your corporation’s name is still available, then the Secretary of State will issue a Notice of Reviver. If your corporation’s name has been taken, you will be instructed to choose another name for your corporation and to amend your Articles of Incorporation.
Likewise, the CFTB will allow late filings but will add penalties and interest on each past due filing (5% per month up to a maximum of 25% on unpaid taxes). To revive your corporation based on suspension by the CFTB, you must file all delinquent tax returns and statements, paying all applicable taxes, penalties, interest, and fees, and file an application for reinstatement with the CFTB. The CFTB will interface with the Secretary of State to make sure you have filed the annual Statements. If all is now in order, the CFTB will issue what is called a letter of Reviver.
San Diego Corporate Law: Final Steps After Reviver
Once your corporation is revived, there are a few last steps such as holding a shareholders’ meeting and a board of directors’ meeting and then preparing — and ratifying at the meeting — the revival and corporate minutes. If you need proof of revival, then you will also need to obtain a certificate of good standing to present to a court, bank, title company, or contracting partner.
Contact San Diego Corporate Law
If your San Diego corporation has been suspended or if you need more information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard has the experience to help you keep your corporation in good standing. Mr. Leonard can also help you form your corporation, create and review buy-sell agreements, create and assist in executing business contracts, and assist with any business-related matter. Contact Mr. Leonard by email or by calling (858) 483-9200.