Many startups, entrepreneurs, and business owners will consider registering a corporation instead of remaining a partnership or a limited liability company. To become incorporated, an incorporator must file the company’s articles of incorporation with the state of choice, which provides information including the company’s official name. However, the status of being a corporation under California is not guaranteed to last indefinitely unless all the requirements are met. The lack of compliance may lead to the corporation being suspended or forfeited.
What is a suspended corporation?
A suspended or forfeited corporation does not stop being an association, but it loses all the rights and privileges of a corporation and cannot legally act as a corporation while suspended. The Secretary of State’s office or the Franchise Tax Board, which have the authority to suspend a corporation, use this power to sanction a company. Suspension occurs when the company fails to file its tax return under Revenue & Taxation Code § 23301, fails to pay taxes, or fails to file its “Statement by Domestic Nonprofit Corporation” or “Statement by Common Interest Association.” The inconveniences of filing these documents or paying taxes are greatly outweighed by the consequences of not filing or paying what is required.