What is Administrative Dissolution?
Administrative dissolution is an involuntary process used by the Secretary of State or similar government agency to dissolve a corporation, LLC, or other business entity. Such an action can occur if a company fails to file an annual report or other necessary compliance document by the deadline set by the Secretary of State. It is considered involuntary because the business owner did not decide to dissolve the business on their own, but rather had it dissolved for them by failing to adhere to compliance regulations.
What can be done if a company experiences Administrative Dissolution?
Many states provide a path to reinstating a business once it has been administratively dissolved. However, certain requirements must be met and are unique to each state, though they usually involve paying delinquent fees, paying a penalty fee, and submitting necessary paperwork by a new deadline. Some states only allow for the reinstatement of a company if it takes place within a certain period after dissolution and others do not allow reinstatement at all but will allow the formation of a new company. If a new company must be formed after dissolution, all fees and procedures that apply to a new business are required.
Please check with the Secretary of State for each state in which you do business for specific information regarding reinstatement.
How can Administrative Dissolution be avoided?
Usually, administrative dissolution comes as a result of being delinquent in annual report or tax filings. However, each state may have additional issues that are grounds for administrative dissolution. Ensuring that you file all reports necessary for compliance with the Secretary of State by the deadline each year can keep you in good standing and help prevent administrative dissolution.
For more information on how a registered agent can help you avoid administrative dissolution and remain in good standing with the Secretary of State, click here.