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If your one-person incorporated business is going to wind down
for an extended period of time, but you expect to pick-up again later...
It would be very time-consuming and costly to dissolve the
corporation just to have to re-incorporate again later, re-establish
financial accounts and supplier relationships, etc.
Are there any legal problems one can run into by just letting
the corporation sort of limp along, having its annual
meetings and reports but not actually conducting any business
for a length of time?
Or is it better to go the expensive route of Dissolve and Start Over?
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Alex Goorgle wrote:
If your one-person incorporated business is going to wind down
for an extended period of time, but you expect to pick-up again later...
It would be very time-consuming and costly to dissolve the
corporation just to have to re-incorporate again later, re-establish
financial accounts and supplier relationships, etc.
Are there any legal problems one can run into by just letting
the corporation sort of limp along, having its annual
meetings and reports but not actually conducting any business
for a length of time?
Depends on the rules of the state you are in. In California, for
example, there's a minimum franchise tax of $800 per year whether the
corporation makes any money or not. So if it's in mothballs, it will
still continue to owe those taxes, and won't be able to transact
business until all taxes are paid in full.
Stu
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Alex Goorgle wrote:
If your one-person incorporated business is going to wind down
for an extended period of time, but you expect to pick-up again later...
It would be very time-consuming and costly to dissolve the
corporation just to have to re-incorporate again later, re-establish
financial accounts and supplier relationships, etc.
Are there any legal problems one can run into by just letting
the corporation sort of limp along, having its annual
meetings and reports but not actually conducting any business
for a length of time?
I don't know if there are legal problems, but states
with a corporate franchise tax often have a minimum
tax. (California's is $800.) I think California
also has a minimum tax on LLCs and LLPs, but I'd
need to check.
This next is not exactly a LEGAL comment, but, if you're
not "actually conducting any business", wouldn't you have
to reestablish your supplier relationships, anyway.
Or is it better to go the expensive route of Dissolve and Start Over?
Expensive is a relative term.
--
This account is subject to a persistent MS Blaster and SWEN attack.
I think I've got the problem resolved, but, if you E-mail me
and it bounces, a second try might work.
However, please reply in newsgroup.
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If your one-person incorporated business is going to wind down
for an extended period of time, but you expect to pick-up again later...
It would be very time-consuming and costly to dissolve the
corporation just to have to re-incorporate again later, re-establish
financial accounts and supplier relationships, etc.
Are there any legal problems one can run into by just letting
the corporation sort of limp along, having its annual
meetings and reports but not actually conducting any business
for a length of time?
Or is it better to go the expensive route of Dissolve and Start Over?
I'm not sure what you mean by going the expensive route - and it would help
to know where you are located.
In Maryland, organized entitled (corporations and LLCs) have a $300 per year
filing fee just to keep the company alive. I believe California has
something like an $800 per year minimum fee. If your company will be
dormant for 5 years that's $1,500 in filing fees to Maryland and $4,000 to
California. Here in Maryland you can dissolve or form a corporation for
about a $1,000. I haven't considered any other costs like banking fees and
such and once you've started filing tax returns you have to keep on filing
them if the business is still alive - active or not - and you will most
certainly have incidental expenses like phone book listings and such.
I'm not sure how being dormant for several years will be viewed any
differently by suppliers than by dissolving and reforming. I would imagine
that it won't make much difference, once you don't use them for a while your
account becomes inactive and if left unused long enough I would be surprised
if they didn't want new credit and guarantor information when reactivated.
In my office I generally recommend that if your business will be dormant for
more than 3 years the cheaper route is to dissolve, file a tradename
registration to preserve the name - here in MD that costs $12 and is good
for 5 years - and then reincorporate or revive the corporation later if
things change. Of course, your geographic area, local laws and fees will
impact the decision.
May I ask why you think it is so expensive to dissolve and reincorporate?
Hope this helps,
Gene E. Utterback, EA
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If your one-person incorporated business is going to wind down
for an extended period of time, but you expect to pick-up again later...
It would be very time-consuming and costly to dissolve the
corporation just to have to re-incorporate again later, re-establish
financial accounts and supplier relationships, etc.
Are there any legal problems one can run into by just letting
the corporation sort of limp along, having its annual
meetings and reports but not actually conducting any business
for a length of time?
Or is it better to go the expensive route of Dissolve and Start Over?
If you're in California, with its minimum annual franchise tax, you
should consider dissolving and reincorporating, unless you plan to
continue business as early as next year. In other states, where the
cost of carrying the dormant corporation is more nominal, keeping the
corporation may be more advantageous.
--
Not a lawyer,
Chris Green
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