What Happens If My LLC is Suspended?
Can you walk away from your suspended LLC? Often founders neglect filing with the Secretary of State or Franchise Tax Board. Forgetting about an inactive LLC leads to suspension. Unless you’ve done something inappropriate, you likely can walk away.
To revive a suspended LLC, vote for dissolution. Check if the percentage of members must approve. Pay any owed taxes plus penalties and interest. The state may not hold you personally liable.
A suspended corporation can’t operate legally. It must close doors and stop business activity.
LLCs avoid the $800 annual tax for corporations. Newly registered LLCs also get tax waivers for 2021-2023. There’s no fee to dissolve, but expedited service costs more.
Reinstating a suspended LLC takes over 8 weeks. Pay extra to speed up processing to 24 hours. LLCs pay less tax than corporations based on gross receipts.
Managing LLC Suspension
In some cases, the state may require the LLC to be dissolved and its assets liquidated in order to pay off any outstanding debts.
Tax Procedures on eFiling:
- Go to eFiling.
- From the Taxpayer List, navigate to the Organisations tab.
- Open the menu.
- Go to the Organisation Tax Types sub-menu.
- Tick the tax type.
- Enter a tax reference number.
- Register by selecting the Register button.
Legal and Financial Implications
If you dissolve the LLC when there are known/present creditors, the members of the LLC will generally be liable for amounts distributed from the LLC to the owners.
Dana Shultz, a lawyer for startup companies, discusses whether and how a California founder can walk away from a suspended LLC.
Starting Anew or Ending a Business:
- If your company is solvent, you can request that your company be struck off the register at Companies House by completing a DS01 form.
- Can HMRC chase a dissolved company? Revenue can investigate dormant or dissolved companies. They are entitled to apply for it to be restored to the register, if tax outstanding justifies the effort.
Determining your readiness to sell your business comes down to two factors: your financial readiness and your emotional readiness to walk away.
Reflections on Business Challenges
The experience of managing a business influences new ventures. For example, with the brain training app Solitaired, the cofounders first assess the quickest, easiest path to testing an opportunity. It’s time to walk away when there is no sustainable market for your product or service and you are not willing to invest more. There isn’t a law that gives you the right to leave a partnership simply because you are not happy. When you don’t have an effective strategy to make money, be prepared to walk away from the business.