When a California LLC is suspended, the entity has lost all its rights and privileges and cannot legally operate until the business has been reinstated. During this suspension period, the entity is technically required to stop all business related activity. In order to once again achieve good standing, the business must be revived. Therefore the main questions become “Why is my LLC suspended?” And “How do I revive my business?”
There are several reasons why a California entity may be suspended. In order for a business to stay in good standing, the business must be registered with the California Secretary of State's office, in which they are assigned an identification number, and the entity will be required to file a Statement of Information along with the $20 filing fee every other year. In addition, every entity is required to keep the Statement of Information up to date and also file an annual tax return with the Franchise Tax Board (FTB). Either or both the California Secretary of State's office and the Franchise Tax Board can suspend a California entity for failing to complete to these requirements, and upon suspension the business will be unable to legally operate. This means they will be unable to transact any business, answer or initiate any lawsuits, or protect and preserve their business name. If they do not follow this, the party is subject to fines and possible imprisonment.
The California Secretary of State will suspend a California LLC if it fails to timely file the required Statement of Information of Members and Managers with the $20 filing fee, or fails to update the Statement when there are changes. Failure to file the Statement on time may also result in a $250 late fee. If the Statement remains unpaid, the Franchise Tax Board may also require interest to be paid.
The Franchise Tax Board will suspend a California LLC for several reasons. A suspension will occur if the LLC fails to pay the minimum annual franchise tax of $800, fails to pay the "gross revenue tax," or any taxes due and owing. Another reason is if the LLC fails to file a tax return. Remember that a tax return is required even if the LLC transacted no business. Lastly, a suspension can be imposed if the LLC fails to file the Statement of Information with the Secretary of State which resulted in a $250.00 late fee that has accrued interest.
The best way to revive your LLC is to get in touch with both the Franchise Tax Board and the Secretary of State to determine what caused the suspension and what the exact requirements and amounts are to reinstate your specific entity back to active status. If the LLC was suspended by the Franchise Tax Board, the suspended entity may have its privileges reinstated by filing all delinquent tax returns and statements, paying all taxes, penalties, interest and fees and filing an application for a certificate of revivor. To speak with a FTB representative for businesses in the U.S., call (888) 635-0494. If the LLC was suspended because it failed to file the requires annual Statement of Information, the LLC can be revived by sending a letter to the Secretary of State along with the delinquent Statement of Information and the payment of overdue fees and penalties. To speak with a representative at the Secretary of State about your Statement of Information, call (916) 657-3537.
Before the business can be fully revived, the FTB will have to check with the Secretary of State to make sure everything is ready to be back in active status. However, this leads to a common problem. During the time a business is under suspension in California, another individual or entity is free to assume the suspended business’ name. When this occurs, unfortunately to finalize the revivor process you will have to select a new business name, prepare business minutes authorizing the entity to change its name, and also prepare and file amended Articles of Organization with the Secretary of State.
The suspension of a LLC can cause serious problems for a California entity. To avoid this, owners should remember to regularly review what is required of them from both the Secretary of State and the Franchise Tax Board. If you find out that your LLC is suspended however, the officers should act quickly to restore its good standing. For more information, check out our Reinstatement page or feel free to call us toll-free to help you with the process.
SunDoc Filings is not a law firm. The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.