Recently, I received a call from the owners of one of my clients who explained the shocking news that they had apparently lost the right to their limited liability company’s (LLC’s) name. Why? They failed to timely file their required periodic statement of information with the California Secretary of State. They wondered whether I could help bring their LLC back into good standing. Quickly thereafter, I was able to confirm that in fact my client’s LLC was “SOS suspended” and that their company’s name had been taken by another party during the suspension. I called my client to confirm that they would have to revive their LLC by (1) filing a statement of information, and (2) paying the outstanding fees and penalties imposed by the Secretary of State. But first, they would need to change their LLC’s name. Because this name had deep family roots and a great deal of sentimental value, the news was understandably not well received, and they were left wondering, how could this have happened?
Failure to Timely File a Statement
So, what did happen? Every California and California registered foreign LLC must file a statement of information with the California Secretary of State within 90 days after the filing of its original articles of organization and, based on the original file date, every two years thereafter during a specific six-month filing period. The statement of information includes such things as the LLC’s business address, the names and addresses of its managers, the agent for service of process, and the LLC’s line of business. The California Secretary of State will suspend an LLC if it fails to timely file its required periodic statement of information.
Effects of Suspension
- If an LLC is suspended for failing to file its required periodic statement of information, the California Secretary of State will provide a suspension notice.
- If the statement of information is not filed within 60 days after the date of such notice, the California Franchise Tax Board will assess a $250.00 late fee.
- A suspended California LLC may not conduct business, prosecute or defend an action in a California court.
- Any contract executed by a suspended LLC may be voidable at the option of the other party.
- While the California Secretary of State lacks the authority to prohibit foreign LLCs from transacting business outside the state of California, foreign LLCs that are suspended by the California Secretary of State are subject to the same restrictions as California LLCs during such suspension for activities conducted within the State of California.
- Finally and more importantly for my client, while an LLC is suspended another party may assume its name.
Returning Your LLC To Good Standing
If your LLC has been suspended by the California Secretary of State for failing to timely file its required periodic statement of information, it can be placed back into good standing by being revived or reinstated, which usually means filing the delinquent statement of information with the California Secretary of State’s office and paying any outstanding fees and penalties. However, if an LLC’s name was taken while the LLC was suspended, the LLC may not file its statement of information until the LLC changes its name by filing an amendment to its articles of organization.
It is important to file your statements of information on time and to take timely action on all notices received from the California Secretary of State. Failing to do so is a trap for the unwary. California and California registered foreign LLC’s that fail to file their required periodic statements of information with the California Secretary of State may incur significant penalties, including the possibility of losing the right to register their company name with the California Secretary of State. In the event you have a California LLC and your LLC is suspended by the California Secretary of State, your LLC may not conduct any business until it is brought back into good standing. In the event you own a foreign LLC registered to conduct business in California and your LLC is suspended by the California Secretary of State, your LLC may not conduct any business in California until it is brought back into good standing. In the event another party adopts your company name or a name that is confusingly similar to your company name while your LLC is suspended you will not be permitted to file a statement of information or pay your outstanding fees and penalties until you amend your articles of organization to change the name of your company.