Once you’ve set up a Limited Liability Company (or any other business entity for that matter), your work is not complete. Just like everything else even remotely complex in nature, your business entity needs maintenance. There are different types of maintenance required to keep your entity "healthy." Regardless of the nature of your business and the industry it is in, all entities need to be, at a minimum, maintained in ways designed to preserve its limited liability protections, and to remain in good standing with your State.
We’ll discuss preserving your limited liability protections at a later time. For now, we’ll focus on the state requirements to keep your entity in good standing. California has just announced, for the first time in the 15 years LLCs have been authorized, that they are going after noncompliant LLCs. These are LLCs that have not filed state income tax returns, pay any income fees due, pay the minimum annual tax of $800 which I discussed earlier, or file the Statement of Information which is due every two years.
Remember, these items are usually required even if you never conducted business after forming the LLC. What does it mean when your entity is suspended?
Suspension means that a company loses the right to its name and its ability to sue or be represented in court, its contracts are unenforceable and it cannot legally do business in California, according to the Franchise Tax Board, the state tax agency.
This first round of crackdowns is being performed by the state’s tax board. After this round, the Secretary of State’s office has indicated they will also begin suspension proceedings. Forming an entity and then maintaing it is crucial to preserve your business and enjoy the benefits that business entities provide. Be sure your entity is up to date with all filings, fees and income tax returns.
