My Company Is Not In Good Standing…Now What?

There are many daily, monthly and yearly tasks and responsibilities that go into running a successful company.  Everyone gets busy and can lose track of time or forget to take care of every little business detail.  Perhaps you have not kept up with the annual Delaware filings for your company for several years.  Now you realize that your company is in a void, forfeit or cancelled status.  What exactly does this mean, and what do you do now?

If your company has not paid or filed the annual franchise taxes and/or registered agent fees for consecutive years, then your company may be in a delinquent status.  This means that the company charter is no longer in good standing with the State of Delaware.  In order to maintain full asset protection, your company must be in good standing with the State of Delaware at all times.

If you find yourself in one of these types of situations, what options do you have?  You will need to decide whether it is best to renew your existing company or start fresh with a brand new company.  Here are some factors in making the choice on how to proceed:

• How long have you been incorporated?  Banks, lenders, investors, etc. feel more comfortable working with a company that has been in existence for a long time.  If your delinquent company has been incorporated for many years, then it may be better to consider filing a renewal so you can keep the original incorporation date.  However, if your company was just recently formed and doesn’t have much (if any) history, then you can think about forming a new company instead, often times while using the same original company name.

• Does your delinquent company have any outstanding loans, contracts, bank accounts, Federal or State tax issues, etc?  Forming a new company does not “erase” any of these pending items.  Since every company situation is unique, you will need to speak with your bank representative and/or accountant to determine what would need to be done to transfer these matters into a potential new entity.

• Did your company obtain an EIN (Employer Identification Number)?  The IRS issues a distinct EIN for each individual company, which stays with the entity for its lifetime. Therefore, when a company files a renewal, typically the EIN will not change.  However, under special circumstances, the IRS will allow an existing EIN to be transferred to a brand new company.  Otherwise, a new EIN will have to be obtained when forming a new entity.

• Did you file a Foreign Qualification (or Certificate of Authority) for the company in your home state? If you are filing a renewal for the company in Delaware, then you may want to check with your home state too, and see if there are any outstanding filings due. The Foreign Qualification would have been filed based on details from the original company formation; therefore, starting a new company would also result in filing a new Foreign Qualification.

These items will help you get started in determining if your company should be renewed or if you should simply start over with a new business entity.  Either way, Harvard Business Services, Inc. can provide the necessary details to restore your company back into a good standing status.  Or we will gladly assist with the formation of a new company, obtaining a new EIN and filing a Foreign Qualification in your home state.  We are available to help you get through the process as quickly and efficiently as possible.