When you file paperwork for your business to become a California corporation, your company gets its own identity. The corporation exists as an independent “person” under the law. The corporation also has ongoing obligations that it must fulfill. If the company does not do all of the things required of it each year, you could find yourself responsible for the resultant fees under certain circumstances.
If you decide that you do not wish to do business after you have incorporated, you still need to take the formal legal steps to dissolve the business. Although many people do not realize it is necessary to dissolve a corporation that never did any business, the reality is that there are serious consequences for just abandoning the company. A San Diego business law attorney can assist with the process of formally dissolving your corporation so the business ceases to exist and has no further legal duties.
Why You Need to Dissolve a Corporation that Never Did Any Business
It is necessary to dissolve a corporation that never did any business because every corporation in the state of California has ongoing duties. These obligations are not triggered by the company providing products or services or opening its doors to customers. Instead, the obligations for the corporate entity are created as soon as the corporate forms are filed and accepted by the state.
Under California law, every corporation must comply with reporting requirements and must pay a franchise tax for as long as it continues to exist. If you ignore the franchise tax requirements, the business will get repeated notices and eventually it could be suspended. However, even if the business does end up being suspended, the company will still owe the franchise tax to the state.
Corporate owners and directors generally are not personally liable for debts of the business, including the franchise tax. However, if you took out any of the assets of the business, including any money or property, then you might be required to pay the corporation back so that the franchise taxes and other costs could be paid. You could be responsible for compensating the business up to the value of the assets withdrawn.
It is not worth incurring taxes, fees and other costs associated with keeping open a corporation that never did business and that you do not plan to do business with in the future. Instead, you should go through the formal process of dissolving the company. It is not that complicated to dissolve a corporation that never did any business provided that the organization has no outstanding debts (like unpaid franchise taxes). The sooner you act to end the company permanently by filing appropriate paperwork, the less complicated the process of dissolving the corporation will be, and the less chance you take of having legal problems later.
An experienced San Diego business lawyer at Sepahi Law Group, APC can help you to dissolve your business. Call today to schedule a consultation and get the process started so you can move on without the abandoned corporation hanging over your head.
