Legal Question in Business Law in California

Re: How to make SUSPENDED Corporation to ACTIVE

The most common reasons for a corporation to be suspended are failure to pay taxes, failure to file tax returns and failure to file the Statement of Information. The reason for suspension determines the procedure necessary to reinstate. It could be as simple as filing a form and paying a fee.

Having an attorney would be helpful, but not legally required.

Re: How to make SUSPENDED Corporation to ACTIVE

To follow up on Mr. Starrett's sound answer, your friend or his counsel should contact the Cal Secretary of State to determine the reason for suspension.

If the suspension is the result of unpaid taxes, your friend needs to be aware that all contracts entered into during the period of suspension or voidable at the option of the other party to the contract. Be aware that when tax returns are finally filed and tax payments made, the corporation can also "buy" its way out of contract voidability. There is a penalty that must be paid for the period during which he made the contracts he wants saved. It can be expensive, but if the corporation has contracts still pending, buying the relief from contract voidability may be necessary.

Also, your friend should be aware that a suspended corporation can neither sue or defend against a lawsuit while suspended. This can be deadly. Although courts will usually grant a reasonable time for the suspended corporation to reactivate, it needs done quickly.

Your friend should contact either an attorney who practices corporate law, or tax law. The process itself is not difficult, but there are some ins and outs that a corporate attorney would know.

I've been through this a time or two working both for and against suspended corporations. Feel free to let me know if you need additional information.

Regards,

Tom Newton

Re: How to make SUSPENDED Corporation to ACTIVE

You would have to file a Revivor. The minium tax would have to be paid for each year that no tax return was filed. Natually, if the company had a profit, general corporate taxes would apply. After all tax returns are filed and all back tases are paid, the corporation standing can be changed to good standing or active.

Re: How to make SUSPENDED Corporation to ACTIVE

It's probably because of his failure to file required notices, paperwork and disclosures, or pay the taxes. An attorney could certainly help him quickly get back on track if that is his goal. Feel free to contact me if serious about getting the help he needs.

Re: How to make SUSPENDED Corporation to ACTIVE

To bring a corporation from suspended to active status is to revive it, and what it needs is a "certificate of revivor." There is a form called "Application for Certificate of Revivor" published by the Franchise Tax Board, and I believe it is FTB 3557. Try the FTB's Web site. The one-page form has instructions that basically say "Do what you didn't do and should have, then file this form stating that you've done those things."

The things may include (1) failure to pay annual franchise taxes, (2) failure to file annual franchise tax returns, and/or (3) failure to file a periodic Secretary of State Form SO-200 (the statement of officers, etc.) as required by Corporations Code section 1502.

Your friend can look at his corporate records and corporate checkbook and see which of these items is in arrears. Probably all three. Payment of the franchise taxes plus penalties and interest is probably going to run several thousand dollars by the time the corporation gets suspended, plus if records haven't been maintained, it will be a time-consuming hassle to generate accurate tax returns, and you can be sure that as needy as the State of California is these days, they will be looking carefully at the probable accuracy of the returns. If the corporation has employees, withholding-tax and unemployment tax issues may arise as well.

As the previous answers have pointed out, suspension has a crippling effect on the corporation's ability to function. Among other things, it cannot maintain suit in state court and as a practical matter it cannot defend. Any contracts it has entered into during the period of suspension are, although not strictly void, voidable by the other party at its option, by suit for rescission.

So, to answer your questions, the first thing to do is figure out what hasn't been filed, and file it. This is probably gonna entail a lot of catch-up accounting and several thousand dollars of back taxes, plus accountant fees if your friend needs one to figure the taxes and penalties. Be sure to file Federal returns as well. Answer to question #2 is that an accountant or a well-qualified bookkeeper will be more useful than a lawyer, unless the corporation has contract problems; also, a lawyer cannot appear in court on behalf of a suspended corporation. #3. Taxes owed? Any that were due and not paid! (Plus penalties and interest). A corporation must file annual tax returns (state and federal) and pay the state a minimum franchise tax, generally $800 whether or not there was a loss or no activity.