Can My Limited Liability Company Be Suspended?

I was recently having a conversation with another attorney who was dealing with a Limited Liability Company with a suspended status.  She was telling me how most of her clients are unaware of the greave consequences that a suspended or cancelled entity may have on their business. She was saying that some of her clients are not even aware of the fact that an entity can even be suspended or cancelled.

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A Limited Liability Company, or an LLC can be suspended by the Franchise Tax Board, or by the Secretary of State.

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The Franchise Tax Board can suspend your LLC for any of the following reasons:

1. Failure to file a return for your LLC, 

2. Failure to pay any of the following:

   1. LLC’s taxes,

   2. LLC’s penalties, which includes the Secretary of State’s penalties, 

   3. Any fees incurred by the FTB, such as fees relating to collection efforts, enforcement, filing of liens, or sheriff. 

   4. Any interest on the taxes. 

The Secretary of State can suspend your LLC for failure to file a timely Statement of Information with the Secretary’s office.  

The effect of a suspended LLC can be severe.  For example, a suspended LLC cannot:

1. Legally do business in California.

2. If it is in a lawsuit, it cannot defend itself.

3. Receive automatic extension to file taxes.

4. File an appeal before the Office of Tax Appeals.

5. Legally close or dissolve the business.

6. It cannot legally enforce a contract it has entered into.

Additionally, there is a contract violability penalty.  This means that any contract that a suspended LLC enters into is voidable, and the FTB will assess a $100 per day penalty. 

If you fear that your LLC is in danger of being suspended, do not wait because waiting can lead to suspension, and suspension can have severe consequences.  Contact a competent business attorney to assist you in fixing the issue so that you are back to good standing.  If your LLC is suspended, an attorney can also help you revive the entity.  Our firm works with many small and large business in order to help them be in compliance, and stay in compliance.  You may contact us for a free case evaluation.  

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Sara F. Zahbihi is a founding partner at Zahbihi & Watkins Law Firm, APC.  Sara is fully familiar with the Secretary of State, and compliance requirements for entities from inception to cancellation. 

The information in this article do not constitute legal advise.  Although every effort is made to maintain this article current, Zahbihi & Watkins Law Firm, APC cannot be held liable for any information provided here that may be not fully reflect the change in law.  Please see our full legal disclaimer.