My California LLC is "Suspended"- How Can I Revive or Reinstate my Suspended California LLC?
Prepared By: Melissa C. Marsh, Los Angeles Business And LLC Attorney
Written: March 2009 - Last Updated: August 2017
Last Updated: May 2017
When a California LLC is suspended, the LLC has lost all its rights and privileges and cannot legally operate until the California LLC has been revived (reinstated or brought back to Active status). Recently, we have also seen many insurers cancel the policies of suspended California limited liability companies and commercial banks suspend credit lines and close the bank accounts of suspended California LLCs and corporations. Technically, when a California LLC has been suspended it is required to close its doors, and stop all business related activity. For a suspended California LLC to once again achieve good standing, the California LLC must be revived.
Why a California LLC May Be Suspended.
Every LLC formed in California is registered with the California Secretary of State's office, assigned an identification number, and is required to file a Statement along with the $20 filing fee every two years, and to additionally update the Statement of Information whenever the information provided has become out-of-date (change of address or manager). In addition, every California LLC is required to file an annual state tax return with the Franchise Tax Board, even if the LLC did not engage in any business activity. Either the California Secretary of State's office and/or the Franchise Tax Board (FTB) can suspend a California LLC for failing to adhere to these requirements.
The California Secretary of State will suspend a California LLC if the LLC fails to timely file the required Statement of Information of Members and Managers with the $20 ($25) filing fee, or fails to update the Statement when necessary. Failure to file the Statement on time may also result in a $250 late filing fee penalty. If the Statement remains unpaid, the Franchise Tax Board (FTB) may also impose additional penalties and monthly interest up to $695.
The FTB will suspend a California LLC if the LLC: (1) fails to pay its required annual franchise tax (minimum annual franchise tax is $800), fails to pay the "gross revenue tax," or any taxes due and owing; (2) fails to file a state tax return (a tax return is required even if the LLC transacted no business); or (3) fails to file the Statement of Information with the Secretary of State which resulted in a $250 late fee that has accrued interest.
If you would like Ms. Marsh to find out exactly what triggered your California LLC's suspension, what is needed to revive your suspended LLC (back to good standing), and the amounts owed in delinquent taxes, penalties and interest based on the $800 minimum tax, Attorney Marsh can perform this service within 24 hours, or 1 business day, and the fee is just $499. Just Complete Ms. Marsh's Reviver Phase 1 Intake Sheet and after Ms. Marsh receives confirmation of your payment she will contact you at the telephone number you provide for any additional information needed.
Effects Of Suspension on a California LLC.
Upon suspension, the agency that instituted the suspension will send the California LLC a suspension notice, at which time the LLC is thereafter disqualified from exercising its powers, rights and privileges. In other words, the LLC cannot legally operate, sell or buy property, get a loan or line of credit, collect rents, enforce the terms of a lease, bring an action in court, or protest an assessment.
Until the suspended California LLC corrects its suspended status, the LLC will be unable to transact any business, answer a lawsuit filed against it, initiate litigation, sell any of its assets, close an escrow, or protect and preserve the LLC name. Any contract executed by a California suspended LLC is voidable at the demand of the other party. Any person who attempts or purports to use any of the LLC's powers or privileges while the California LLC is suspended is subject to fines and/or imprisonment (although I do not think California has ever gone this far). During a period of suspension, a California LLC is only allowed to: (1) change its name by amendment to its Articles of Organization and (2) apply to the FTB for tax-exempt status; but the suspended California LLC is still required to file its Statement of Information and keep it up to date, pay all its applicable taxes, and to file its tax returns (even if no money is earned).
The FTB will issue a delinquent penalty for failure to file a timely tax return of 5% per month up to a maximum of 25%. Interest begins on the original due date of the return. The FTB will issue a demand penalty when a LLC fails or refuses to furnish information requested by the FTB or fails to file a tax return after written notice and demand. In either case, the demand penalty is 25% of the FTB's assessment of what is owed or 25% of the tax shown on the return when filed before any refundable credits and payments from the original notice to the date full payment is received.
Revive and Reinstate My LLC in California.
If your LLC is suspended, you need to get in touch with the both the Secretary of State and the Franchise Tax Board to determine what triggered the suspension and what is required to revive, or reinstate, the LLC back to "active" status. Unfortunately, with all of the government cut backs this is not an easy endeavor. That said, our office can help and generally can gather the requisite information within 24 hours, or 1 business day. If you would like Ms. Marsh to assist you in finding what is needed to revive your suspended California LLC, including what documents must be prepared and filed and the assessed back owed taxes, penalties and interest, please call 323-655-1002, or Email your request. For faster service, you can also complete Attorney Marsh's Reviver Phase 1 Intake Sheet Online.
If the LLC was suspended by the Secretary of State simply because it failed to file, or update, the Statement of Information, you may revive the LLC simply by sending a letter to the Secretary of State along with the delinquent Statement of Information and the payment of any filing fees ($20), penalties ($250), and interest imposed. Once all of the paperwork has been filed and all of the delinquent fees and penalties paid, the Secretary of State will send a "Notice of Reviver" to the LLC and notify the FTB. That is so long as the LLC's name was not taken by another California LLC or corporation during the period of suspension. CAUTION: It is presently taking the California Secretary of State up to 4 months to process a Statement of Information that is mailed in and while processing your Statement, the LLC may become suspended by the Franchise Tax Board. If you would like Ms. Marsh to revive an SOS Suspended California LLC within 3 business days, we can perform the necessary tasks for a flat fee of $750 plus the costs.
My office files all documents with the California Secretary of State in person and on an expedited basis. By filing the appropriate documents in this manner, we can revive a Secretary of State suspended California LLC typically within 72 Hours.
If, on the other hand, the LLC was suspended by the FTB, the LLC may only be revived, or reinstated, by filing all delinquent tax returns and statements, paying all applicable taxes, penalties, interest and fees, and filing an application for a "certificate of reviver" with the FTB.
Before the FTB will issue a certificate of revivor, the Secretary of State must approve the LLC's name again. This is because during any period of suspension, another California LLC or corporation may reserve and/or adopt the suspended LLC's name. If the application is accepted, the FTB will notify the Secretary of State, at which time the restoration of the LLC's powers and privileges will become effective (retroactive to the date of suspension) and the revivor will become a matter of public record. CAUTION: If your accountant prepares your tax returns and submits them via electronic filing or mail, along with all of the back taxes, penalties and interest it will usually take 3-8 months for the FTB to process your requests.
My office, on the other hand, can typically revive a suspended California LLC with the FTB within 3-5 business days.
Three Common Problems that May Arise When Trying to Revive an LLC in California.
When an LLC has been suspended in California, another individual or entity is free to assume the "suspended LLC's" name. Although you may love your LLC name, when this occurs to finalize the reviver process you will have to: (1) select a new LLC name, (2) prepare LLC minutes authorizing the LLC to change its name, and (3) prepare and file amended Articles of Organization with the Secretary of State.
A second common problem faced by suspended LLCs in California is determining exactly what is owed in interest and penalties as there is no set formula and each FTB agent may calculate the interest and penalties in a different manner.
A third common problem faced by a suspended California LLC is the request for a walk through revivor. A walk through reviver is a one-day process that requires an attorney, or representative of the suspended LLC, to obtain an appointment and personally appear at a FTB field office. This typically occurs, when the California LLC is faced with a pending escrow, loan or litigation.
Suspension can create serious problems. California LLCs should therefore regularly review their compliance with filing obligations to avoid suspension. If the LLC learns of an impending suspension, or discovers it has already been suspended, the members or managers should act quickly to restore the LLC to good standing which may require the assistance of both a corporate attorney and a tax preparer.
If you would like Melissa C. Marsh to assist you in reviving your suspended California LLC, call 323-655-1002, or Email your request. Reviving a California suspended LLC is typically handled on a flat fee basis, and my fee is dependent on the basis of the suspension. Typically my fees can range anywhere from a low of $800 to $4,500+ depending on what's involved.
If you have additional questions, or need specific legal advice tailored to your specific needs, please schedule a low cost Telephone Consultation. If you would like to inquire about my services, please call 818-849-5206.
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