ComplianceFinanceLegalTax & AccountingJanuary 05, 2021

Reinstatement: restoring your small business to good standing

Nobody forms a business with the intention of letting it fall into bad standing. But sometimes it happens. There are instances where a small business owner may not be aware of when a state requirement is due, let alone know that it exists at all. There are other times when a struggling business simply does not have the funds to pay their annual report fee, or some other state requirement that’s needed to keep them compliant. Regardless of how you got there, if you’re in “bad standing” with the state, the question is how do you get back to good standing? Before we tackle this question, let's define what bad standing means.

What Does it Mean to be in Bad Standing?

When a company has not met all the requirements of its home state of incorporation, or any states in which it has a Foreign Qualification (additional U.S. states where it conducts business), it can fall into bad standing. For example, a small business can fall into bad standing if it fails to file its annual report in a timely manner. Another instance would be if your Registered Agent resigns from representing your company (this typically happens when a small business has failed to pay the Registered Agent’s annual fee). In the state of California, failing to pay your franchise tax puts you in bad standing, while New York state businesses would suffer the same fate if they don’t meet the states publications requirement. Companies that are in bad standing long enough risk being dissolved or revoked by the state. When a state administratively dissolves a corporation or Limited Liability Company (LLC) or revokes the company’s corporate or LLC status, the benefits of each company formation — including limited liability protection — are lost.

How to Reinstate Your Small Business Back to Good Standing

A company may be required to undertake the reinstatement process when it has fallen out of good standing with its home state, any state(s) in which it has a Foreign Qualification, or if it has been dissolved due to failure to comply with state rules and regulations. Reinstatement requires a company to resolve outstanding business compliance issues and submit necessary forms and fees to the state. To follow is a list of the major requirements a business needs to meet in order to be reinstated to good standing: First it must identify all of the steps it must take to become compliant It must determine any and all outstanding or overdue fees due to the state A small business must obtain and complete all necessary forms required to be reinstated Audit these reinstatement forms, looking for any errors prior to submission Submit completed reinstatement forms to the appropriate state agencies Reinstating your business allows you to regain the benefits and advantages of both corporate status and the limited liability protection that comes with it. When you reinstate your business, you will gain the peace of mind that you can enter new contracts and continue running your operations without worrying that your business has an uncertain legal status.

Compliance Tools

After you have taken the necessary steps to reinstate your business to good standing with the state, consider using a compliance management tool to notify you of upcoming compliance events for your corporation or LLC. Any small business who utilizes BizFilings as their Registered Agent has free access to BizComply, which makes it easy to remain compliant.

What if You Want to Dissolve Your Company?

If a small business is in bad standing with the state and wishes to dissolve, most states require a reinstatement to be filed prior to allowing the dissolution. As a side note, some states also allow a reinstatement to be filed if the company has dissolved but would like to reverse the dissolution to again begin transacting business under the same company.

We're Here to Help

We understand that this can be very confusing, complicated and time consuming. Whether you simply have questions, or need assistance with reinstating your small business back to good standing, feel free to give our customer service team a call between 8am and 7pm CST, at 855-335-8519. You can also visit our Contact Us page to speak with us via Live Chat during the same days and times. We’re always happy to help.

Nikki Nelson
Customer Service Manager
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