How much do you know about your company’s story? Just like a great novel, your company’s narrative has a beginning, middle, and end. Often times, companies forget that their story has to end.
Every so often, conflicts such as financial tolls, familial hardships, and legal issues cause company owners to close the book on their saga without taking the necessary steps to finish the story. This preemptive move results in uninformed or misinformed decisions that hinder the company’s legacy. Just like a book, if a company opens, it also needs to close. Even though there are two ways of “closing” a company, only one way is truly beneficial for the entity.
Advisors sometimes direct their clients to have the registered agent complete a resignation of registered agent. In simple terms, a resignation is the removal of the registered agent’s name/liability from the company. What is often not effectively communicated is resigning from the entity does not automatically shut the company down.
In fact, the subsequent actions that follow are: a 30-day waiting period allowing the company to name an agent and continue legally conducting business, falling into “bad standing” or “inactive” status, and finally rendering the company legally unable to conduct business. However, because the entity was not formally shutdown via a cancellation, dissolution, or withdrawal document, some states are able to tax the company for up to three years.
In some states, an entity in an administratively inactive status can present problems when attempting to start a new business, qualify in other states, etc. An administratively inactive status is a forced state status in which a company has not formally shut down and has not submitted proper annual documentation to keep the entity active. This status renders the company unable to legally conduct business and, in some instances, relinquishes the ability to move forward with the submission of other legal documentation until the status is rectified either by paying back taxes and or fees, filing past due annual reports, closing documents, etc. which can become quite costly.
The best way to ensure your entity is formally shut down, is to file a cancellation, dissolution, or withdrawal in the respective jurisdiction(s). However, which document you must file depends on the state and entity type. For the best information, contact either your registered agent’s corporate division or visit the corresponding Secretary of State’s website.
Remember, in the end, a resignation only helps one party. Get informed and don’t forget to “close” the book on your entity.
Amanda Archambault, Registered Agent Associate