Can you reinstate your company after it's been dissolved?
Types of Corporate Dissolution
There are two categories of dissolutions:
- Voluntary dissolution
- Involuntary dissolution
A voluntary dissolution is when your company chooses to shut down. Maybe you and your partners have decided you're not going to go any further. Or it's just your business and you've said you've had enough and you're going to go back to a different job or maybe just start a new company.
Involuntary dissolutions happen in two main situations,
- If you fail to pay taxes, your local state may just shut down your company administratively.
- If a shareholder (someone who owns the company, maybe a co-owner or partner) decides that they want to dissolve the company, so they bring a lawsuit.
Whether it's voluntary or involuntary dissolution, your company is dissolved in the end. A voluntary one will go through the state and the state will decide that it is dissolved. An involuntary one will allow you to either pay your taxes or go through a full lawsuit and have a judge say whether or not the company has to be dissolved.
But at the end of the road, no matter which path you've taken. There are ways you can reinstate your company.
Reinstating Your Business
There are usually five "steps" to reinstating your business,
- The first thing you need to do is contact your state and find out why your company was dissolved. Especially if it's as simple as paying taxes you have a direct solution at that point.
- Next, if it was because filings weren't done or fees weren't paid, then you know you need to get your filings up to date and get your fees paid.
- Third, you'll need to file those documents and pay those fees. (A quick warning here, if you haven't been paying taxes or you haven't been paying state fees, there's probably going to be late fees that have been accruing. If your business has been operating for years, those fees can really add up.)
- Once you filed your documents or you paid your fees, find out what's next from the state. Often they'll give you a certificate or a letter saying that you've now complied with the requirements and you're ready to be an active company again. And you'll need to file whatever they want you to file. At that point your fees are paid, your documents have been filed. Find out from the state what else has to be done.
- Finally comes the most frustrating part. And that is simply you've got to wait for the state to make you an active company again.
This doesn't mean that you can't transact business and you can't do other work for your business. It just means that the state is going to treat you as a business that has been dissolved. But once you've gone through the steps and you've got your documents filed, you should be back in good standing and be able to continue business and make your yearly filings.
Why Does it Matter?
Many people ask me why does it matter if my company is dissolved or not? Even if I haven't paid all of my taxes, I'm still running my company, I should be okay, right?
Well, first, they can obviously come after you for tax fraud. If you haven't been filing taxes and your business has been making money, the state's going to want their taxes. And secondly, if you need to file a lawsuit against somebody, if your company has been dissolved, you may not be entitled to bring a lawsuit against somebody. If you do, the other party will bring up this issue as a defense to your lawsuit.
In many states, you can actually cure your filing defects, pay your fees and continue with the lawsuit. However, if your company is treated as "inactive" or "dissolved," a court can dismiss your case and say you're not an active company and you haven't done taking the steps necessary to get it back.
What Should I Do Next?
There's two ways you can handle this. You could just keep operating your company even though it is dissolved and you can hope for the best. But the reality is at some point the state's going to catch up with you, the tax authorities are going to catch up with you, a lawsuit will catch up with you, someone will catch up with you. The smart way to get around this and get yourself back into good standing is to work with a professional. Work with your accountant to get those taxes filed. Work with an attorney to get your documents back in order. A lot of times it's simple. Maybe you set up the company and just never did anything else. Maybe you went to a website, they gave you some forms, and you just looked at them on a computer, you printed them out and never did anything after that. So in this case, what you can do is work with an attorney to get your documents in order to get everything signed. If you're in that position, let's set up a Legal Strategy Session to review the next steps for you and your business. You can get your filings up to date with the state and you and your company can move forward. Just because it was dissolved doesn't mean you can't reinstate your company and keep growing.
