A suspended California corporation. What does it mean? What do you need to do?
Why Did Your California Corporation Get Suspended?
In California, if you do not pay your corporate taxes, your corporation will be suspended. You can find this rule in California Revenue & Taxation Code section 23301. The same thing can happen if you don’t file a corporate tax return. This can also occur if you do not timely file either the original Statement of Information for your corporation or file your corporation’s annual Statement of Information. (See California Corporations Code section 2205.) So, if your California corporation is suspended, it is likely because you did not (a) pay your taxes; (b) file a tax return or (c) file an updated Statement of Information.
What Does it Mean If Your California Corporation is Suspended?
A suspended California corporation loses its rights to exercise its power, privileges and rights. A suspended corporation cannot bring a lawsuit. It cannot defend itself against a lawsuit. It cannot file a notice of appeal. If a lawyer representing a California corporation learns that is is suspended, there are serious consequences for proceeding with the lawsuit. A suspended California corporation cannot engage in any type of real estate transaction. A suspended California corporation also can lose its corporate name. Another corporation may take away the suspended corporations name by filing articles of incorporation, a name reservation or amending its articles with the Secretary of State. Unlike some of the other consequences of being suspended, which can be restored, losing your corporation’s name to another cannot be restored.
What Do You Do If Your California Corporation is Suspended?
A suspended California corporation can apply to be reinstated to the Franchise Tax Board after it complies with its obligations (filing a tax return and/or paying taxes.) Your corporation is then issued a “Certificate of Revivor.” Once your corporation is reinstated, many of your corporate powers are restored. If your corporation was suspended for failing to file a Statement of Information, after the Statement of Information is filed and the fine is paid, reinstatement occurs.)
What Happens After My California Corporation Is Revived
Once your California corporation is revived, if it is in a lawsuit, it can once against defend itself or prosecute an action. It can also go forward with its appeal. One defense that will continue to run while the corporation is suspended is the statute of limitations. Thus, you should talk with your lawyer if there are statute of limitations issues with a suspended corporation. Once revived, your California corporation can also proceed with real estate transactions.
Unfortunately, if your corporate name has been taken away, you probably were required to use a new name to revive your corporation and that corporate name has been lost to you.
What About Appeals?
if you or your corporation lose in the trial court, there is a very strict 60 day time limit for filing an appeal. If you miss this deadline, you can’t go forward with your appeal. So, what do you do with a suspended California corporation if you need to appeal from the trial court’s decision? That question was answered in a recent California Supreme Court decision. Bourhis v. Lord (Mar. 4, 2013 – S199887, S199889) That case makes it clear that the suspended California corporation must file a notice of appeal within the 60 days and then apply for reinstatement as soon as possible after that. After the corporation is revived, it will then have the right to go ahead with its appeal.
Given the hassles and possible risks of having your corporation’s powers be suspended, it really makes sense to stay up to date with the taxes, tax returns and Statement of Information. If your California corporation does become suspended, talk with your attorney about filing for reinstatement as soon as possible.
The foregoing is not intended to be legal advice. Just because you’re reading this does not mean that I am your lawyer or you are my client. if we have not signed a retainer agreement, then we are not lawyer and client. Instead, the foregoing is general legal information designed to educate the public and whether or not it applies to your situation will depend on many things — none of which we’ve discussed. You should ask your lawyer whether it applies to you. He or she is best situated to analyze these rules and to see if they apply to you. OK?