Can I Reinstate an Inactive Corporation?

By Wayne Thomas

A corporation is an independent entity that exists with a legal life of its own. Every corporation is subject to the laws of the state where it is incorporated. Although the life of a corporation is theoretically everlasting, certain voluntary and involuntary actions by corporate shareholders can cause the company to be declared inactive by the state. Each state has its own rules for restoring a corporation to active status, which can involve the payment of penalties and applying for reinstatement.

Corporate Creation

A corporation operates according to state law, and is formed by filing Articles of Incorporation with the Secretary of State. Although each state has its own preferred form, the Articles almost always require you to supply the business name, purpose of the company, and how may shares of stock the corporation is authorized to issue.

Inactive Corporations

The life of a corporation is theoretically everlasting. In other words, the company will remain in existence until it is dissolved, by either state administrative action or voluntarily by the shareholders. The process for shareholder dissolution can vary between states, but usually requires the filing of Articles of Dissolution with the secretary of state and winding up corporate affairs by settling creditor claims and distributing remaining assets. If the shareholders do not complete this step, the corporation does not dissolve and instead remains inactive. Inactive corporations are not operational and have no revenue or expenses, but are still deemed to be in existence. During periods of inactive status, the corporation must still file tax returns and annual reports, and continues to be potentially liable to creditors.

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Administrative Action

Although a corporation may become inactive voluntarily by ceasing operations, it may also be placed on inactive status by the state. Most states will automatically remove a corporation's active status if the company has failed to file required annual reports or any other state-required documents. However, the time period in which such reports can remain delinquent before inactive status kicks in can vary from state to state. For example, in Louisiana, a corporation will only be placed on inactive status if you fail to file three years in a row. In Georgia, a corporation can be declared inactive if an annual report is delinquent for more than 60 days.

Reinstatement

Like revocation, the process for reinstatement of an administratively inactive corporation can vary from state to state. Georgia, for example, requires a formal request for reinstatement filed along with the current annual report and a filing fee. In Maine, penalties are assessed against the corporation, which must be paid. Further, the state requires the corporation to file an application indicating the grounds for dissolution have been corrected. The application will be reviewed by the Secretary of State for completeness before reinstatement will be approved. In contrast, Alaska does not require the filing of a formal reinstatement request, but imposes the payment of double the filing fees plus all fees that would have been due during the period while the corporation was dissolved. In Alaska, reinstatement is only available for two years after a corporation is declared inactive; after that time, the company must start over with the incorporation process.

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The Difference Between Delinquent & Inactive Corporations
 

References

Related articles

What Is an Inactive Corporation?

An inactive corporation legally exists but has no business activity. A corporation is created by filing the necessary forms with the state business department and the IRS. Once a corporation is officially registered with the state and federal government, it's a legal business and remains so until the corporation is formally dissolved. A corporation that is inactive but not dissolved still has tax and state reporting obligations.

How to Re-Open a Dissolved Company

In theory, corporations can exist forever, but they can also go out of business or be dissolved for other reasons. For example, you and the other corporate shareholders may dissolve one corporation to pursue another business venture; however, you can typically recreate your original corporation if you decide to go back to it. Corporations are independent legal entities formed under state law, and each state has its own laws that control the ability of dissolved corporations to reactivate.

The Dissolution of an S Corp

An S corporation is a corporation that is subject to special IRS taxation rules. Except for certain taxation issues, the procedure for dissolving an S corporation is the same as the procedure for dissolving any other corporation. However, this procedure varies depending on the state of incorporation.

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