How to reinstate a business

This does not, however, have to be the end of the business’s existence. If it can resolve the problems that caused it to lose good standing, it can request reinstatement. This restores the company’s good standing and allows it to get back to business.

What Is Reinstatement?

Reinstatement is the process of restoring a business entity to “good standing” and allowing it to resume operating a business. The specific processes vary from state to state, but they have many common features. It typically involves two state offices:

• The Secretary of State, which oversees business entities organized and registered in the state.
• The Department of Revenue, Department of Taxation, Comptroller, or a similar office that processes franchise tax payments and delinquencies.

How Do You Reinstate an LLC or Corporation?

Broadly speaking, the reinstatement process has two phases: fixing the problems that caused the loss of good standing and then clearing the business’s name with the state government.

It can be helpful to think of the reinstatement process in these terms. The business must do the most work in the first phase. The second phase involves a review by the relevant state agencies. The Secretary of State makes the final decision about whether the business has met the requirements to return to good standing.

Phase 1: Fix the Problem(s) That Caused the Business to Lose Good Standing

A business will not lose good standing without notice from the state. Some states may send multiple notices before suspending a business entity or revoking its authority to do business. These notices will provide the reasons for the state’s actions.

1. File the Required Paperwork

Businesses often lose standing because they missed a deadline to file paperwork. The first step in reinstatement is to determine what documents the business failed to file—and then file them.

• Information reports: Most states require business entities to file reports about their management every year or every few years.
• Franchise tax returns: Businesses may not owe franchise (or equivalent state fees) tax below a certain threshold but must still file a return declaring that they do not owe any tax.
• Notice of registered agent: Every business entity must designate a registered agent with a physical address in the state. This person can receive legal papers and government correspondence for the business. If a registered agent resigns or refuses to serve, the business must promptly file a document appointing a new agent.

Filing missing paperwork might be all a business has to do to get back in compliance before requesting reinstatement.

2. Pay Any Taxes, Penalties, and Interest That Are Due

Some states assess penalties or fines as part of the loss of good standing. A business might need to make payments before it can request reinstatement:

• Late fees: Some states impose penalties for late-filed information reports or franchise tax returns.
• Unpaid taxes: Businesses that failed to pay franchise tax will need to pay all arrears.
• Interest and penalties: Late tax payments may include interest and late fees.

These payments typically go to the state’s revenue or taxation department.

Phase 2: Clear the business’s name

The second phase begins when the business is in compliance with state law again. Now, it needs to present evidence of this compliance and ask the state to restore its good standing.

1. Request a Clearance Letter From the State

Once the revenue or taxation department has processed all paperwork and payments from the business, it can certify that the business has complied with its legal obligations. The business can ask for a document, often known as a Tax Clearance Letter, stating that it complies with state law.

2. File a Request for Reinstatement

The Secretary of State is responsible for reviewing reinstatement requests in most states.

1. The business must file a request on a form provided by the Secretary of State.
2. It must include the Tax Clearance Letter with its request.
3. It must pay a filing fee. The amount of the fee varies among states. It may also vary based on the business’s circumstances. For example, a business that was subject to administrative dissolution might have to pay a higher filing fee than one that only had its charter suspended.

If the Secretary of State approves the request, the business can resume operations. If it denies the request, it might state its reasons for doing so and give the business another chance to ask for reinstatement.

Can You Reinstate a Dissolved LLC or Corporation?

In most situations, an LLC or corporation that was dissolved can request reinstatement. If the dissolution was voluntary, the business owners can form the business entity again. However, if the dissolution was involuntary, the process might be more complicated. In an administrative dissolution, the Secretary of State dissolves the business entity. This often occurs after multiple attempts to notify the business of its loss of good standing. Businesses are often able to request reinstatement after this type of dissolution.

Judicial dissolution is a much more serious process. A judge must order the dissolution after conducting a trial. Whether reinstatement is possible depends on the circumstances. The judge’s order might say that the dissolution is final, or it might allow the business to request reinstatement later.

Reinstating a business requires fixing compliance issues and submitting the proper documents to the state. If you need help or have questions about your specific situation, our Legal Pros can provide personalized guidance to help your business return to good standing.
 

Key takeaways A business entity that has lost good standing with the state loses its right to operate. It can request reinstatement if it fixes the issue that caused the loss of good standing. This often requires filing paperwork and paying overdue taxes and penalties. Reinstatement restores a company’s ability to operate its business.

Additional resources

• What is reinstatement?
• What is administrative dissolution?
• What is a suspension or forfeiture?
• What does good standing mean?