Back in 2002 me and 3 of my college buddies, young, green and without any knowledge of anything formed a corporation. Needless to say the plans fell by the wayside and the entity just lay there dormant, we never did any business and filed any taxes. Now 4 years later, I contacted the NY Dept of State and was told the entity is still active and bottom line…because we didn’t file any taxes the only way to legally dissolve it is to file back taxes and if we didn’t do any business and we report zero, we’d be charged a fee of $800 for each year we didn’t file.
Has anyone been in a similar situation? We are curretly speaking to an attorney and a CPA to see what can be done. Any comments, suggestions would be helpful, as we’re not pursuing individual ventures and don’t want this to come back to haunt us.
Another option to consider is to sell the corporation. Being aged 4 years, there are people who would be interested in purchasing it. You would have to remedy the missed filings, but you might be able to recoup the costs and then some.
Please tell us why you want to dissolve the company rather than continue to let it remain dormant. Are their risks associated with owning a dormant company?
Hi Guys, thanks all for the insightful responses. Selling it, seeing that it is aged 4 years wasn’t something I thought of. Any ideas on how to go about that, or seek buyers that would be interested?
Second, resolving the tax issues and not dissolving may be what we end up doing, we didn’t consider the value of an aged corp. We’ve since given dissolution a second thought.
Let’s assume that this company is incorporated in the state of California. The $800 annual fee tiz78 mentioned is the annual registration renewal fee.
If tiz78 does nothing and continues to allow the company to remain dormant, is there some point in time when the state would consider the entity to be abandoned (for lack of tax filing and failure to renew the registration) and consider the entity dissolved?
Is there such a thing as Articles of Dissolution (with an effective date at the end of the first year of operation) that tiz78 could submit in lieu of renewing the registration for the prior years.
I don’t know about CA. However, based on my conversation with a rep at the NY Dept of State she was surprised the entity was still active because it’s usually deactivated by the State if you go 2 years without filing taxes. This may be different in CA. I also asked her about filing that articles of dissolution and she said the only way that can be filed is if the back taxes are filed and the $800 per year franchise tax for zero reporting is paid.
I then asked what if I do nothing, she said the entity will become inactive and the State will send out a juddgement for the franchise tax. Again, this may be different in your neck of the woods.
I checked in TX and it works the same as NY. Well, I didn’t read about the judgement, but one would have to be in “good standing” to file for dissolution. Plus, TX has no annual minimum tax, which takes the teeth out anyway.
Now, to carry the exercise further: who are they going to exercise a judgement against? The corp is no longer in business and has no assets. They can’t get the registered agent can they? Stockholders are insulated. Would it just be a hollow judgement?