

Sometimes a small business falls into inactive or bad standing with the state. One of the most common ways that this can happen is forgetting to pay the fee for an annual report or file the report altogether. Most corporations and limited liability companies are required by the state to file an annual report and pay a small fee. However, it’s not uncommon to misplace the form, write a check that bounces or forget to file in time. Businesses that do not pay their annual fee in a timely manner may fall into bad standing. It’s also possible that the state will shutter the business through involuntary dissolution.
All is not lost for entrepreneurs that have a lapsed corporation or limited liability company. It is possible to get a dissolved business back into good standing again. Entrepreneurs need to file a reinstatement in order to restore to active status.
Do you know why you fell into bad standing? You might already know why your corporation or LLC was dissolved. Let’s take a look at a few examples for what can lead a business to fall out of compliance.
Maybe one of the examples listed above applies to your current situation, or it could be a different reason altogether.
Once you have identified how you fell out of compliance, you can begin to file for reinstatement as quickly as possible.
What happens if you don’t know why your business was involuntarily dissolved? Contact your Secretary of State or Department of Corporations (if your state has one) to find out why you fell out of compliance. It’s important to fully understand what happened to your small business as part of reinstating a corporation or LLC means rectifying how you fell into bad standing.
When an LLC or corporation is dissolved by the state, the business effectively loses its legal and fiscal protection and tax benefits it received with incorporation. The sooner you file to reinstate the business, the sooner you can get back to operating the business as an LLC or corporation once more.
How do you begin filing for reinstatement? First, determine what kind of paperwork you’ll need to fill out and submit. If you’re not sure which forms are necessary for your specific situation, contact your Secretary of State to find out. While this may vary on a state-by-state basis, most states provide an application for reinstatement. Some states may also request that a representative of the business writes a letter requesting reinstatement, too.
Remember when I mentioned it’s important to understand how your business fell into bad standing? This comes into play when filing for reinstatement. Let’s say you fell into bad standing because you forgot to file your annual report. The paperwork you would need to file would include an application for reinstatement and a delinquent form. Understanding how your business became involuntarily dissolved ultimately allows you to determine which forms to file to bring it back into good standing again.
Your business is almost back to being reinstated again! There’s one more thing that needs to be done before filing your forms — and that’s paying any outstanding fees.
How much do you owe? This varies on a state-by-state basis. Let’s use the example that you’re trying to reinstate a corporation in Montana. According to the Montana Secretary of State, reinstating a for-profit corporation is $30 for the filing fee. An additional $35 must also be paid for each year of delinquent annual reports.
Depending on the state, it’s possible that your small business may owe several hundred dollars in filing and penalty fees. Make sure to contact your local Secretary of State to get the right quote on the amount you owe. Then, pay for all fees necessary to reinstate your small business when filing your forms.
If you would rather not file a reinstatement alone or simply don’t have enough time to do it properly, consider working with a third-party filing organization.
These companies may assist entrepreneurs by preparing a reinstatement for their review and submission to the appropriate state agency. A third-party organization helps complete your reinstatement paperwork, figure out which fees are owed by your business, and then submits the paperwork to the state. Afterwards, they’ll notify you when your LLC or corporation has been restored to active status and good standing. This gives entrepreneurs the peace of mind in knowing they are in full compliance — and ready to get back to business!
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.