What "Suspended" Status Means for a Corporation

Posted about 2 years ago. Applies to California, 1 helpful vote

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Only the Franchise Tax Board and Secretary of State can suspend a corporation's business status. Typically, the FTB suspends a corporation for failing to file one or more tax returns. The SOS may suspend a corporation for failure to pay the business' balance due, which may include penalty(ies) for failing to file the annual Statement of Information with the SOS.

The process to revive a California corporation will depend on whether the corporation was suspended by the FTB, SOS, or both. It is therefore wise to consult with a qualified business attorney as to how to properly reinstate a corporation's status.

When the FTB or SOS suspends a corporation it cannot legally transact business, defend or initiate an action in court, protest assessments, or file a claim for refund of amounts paid, and it loses the right to use the entity name. A suspended corporation loses its right to enforce its legal contracts and if it enters into a contract while suspended, the business cannot enforce that contract unless it gets relief from contract voidability. A suspended corporation is expected to "close its doors" until it is placed back in good standing by being revived or reinstated.

The entity will remain suspended by the SOS until all revivor requirements are met.

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