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Should your business ever become inactive for an extended period of time, or fail to address the regular compliance requirements placed upon it, it may be necessary for you to apply for reinstatement with your state of incorporation. The reinstatement process brings your company back into “good standing” status, and ensures that you are operating in complete accordance with the law. The most common reason that reinstatement becomes necessary is when a business is found to have ignored its required annual report or franchise tax filings.
Reinstatement will likely be necessary if your company fails to observe the compliance requirements placed on it, such as annual report filings, tax payments, or past due state fees. A consistent failure to address these formalities can lead to a suspension of your company’s right to conduct business, or even a forced dissolution.
If your company falls into “bad standing” with the state, it may be required to reinstate itself before continuing its operations, or even voluntarily dissolving. In some states, reinstatement is also a potential solution to reforming a previously dissolved organization.
Consequences of non-compliance
Falling out of good standing with your state can have serious consequences for both your business and your personal finances. A business that has been found to be in bad standing, and fails to reinstate itself in a reasonable time frame, can have its business license revoked, or even be forced to dissolve. In some cases, a company’s limited liability status can be revoked as well, exposing its owners’ personal finances to seizure to satisfy the company’s debts.
There are some steps that must be taken in order to ensure that a company can successfully be reinstated. Here are some general guidelines to follow as you work to get back in good standing:
Identifying and documenting any preexisting compliance issues.
Calculating and documenting any outstanding fees or taxes due to your state.