California imposes serious consequences on suspended corporations and limited liability companies. Suspensions can occur for a variety of reasons including failure to file a timely Statement of Information, failure to pay yearly franchise fees; failure to pay taxes, and action by the Department of Business Oversight, Franchise Tax Board, Secretary of State or the Attorney General.

Under California law, a suspended corporation or LLC, even a suspended foreign corporation or LLC, cannot conduct any business in the State of California until it is revived to active, good standing. In most cases this can be accomplished by filing all past due annual reports and tax returns, and by payment of all past due taxes, interest, and penalties with the Franchise Tax Board. During the suspension a corporation or LLC loses its right to contract. Thus, the corporation’s or LLC’s accounts receivable and agreements made during the period of suspension may be uncollectible and unenforceable. The corporation and LLC also cannot prosecute or defend itself in California courts until the corporation or LLC is revived.

To avoid suspension, it is recommended that corporations and LLC engage an accountant to assist with tax preparation and filing, and to keep track of associated deadlines, as well as hire legal counsel to ensure legal compliance. Once suspended, immediately contact your attorney. Don’t lose your business entity’s legal protection due to an inadvertent failure to pay the government or timely file required paperwork.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.