Written by Adrian Pritchett on January 12, 2009 – 1:00 pm
It’s corporation renewal season in Georgia. If you have a corporation, limited liability company, or other legal entity registered with the Secretary of State, you must file your annual registration by April 1. This is not a simple paperwork matter to be taken lightly. It is essential to your business and should take high priority. In fact, failure to pay your annual fees and keep your records current are enormous risks that could cause you to lose your business or personal assets. First, I will discuss the consequences of not paying your annual registration, and then I will explain why your list of officers and addresses must be current.
Administrative dissolution
Remember that your corporation or LLC is not something that you created. It is a legal entity created by the State of Georgia. If you don’t follow Georgia’s rules, the state will dissolve your entity. If your annual registration is more than 60 days late, the Secretary of State can start the legal process of dissolving your entity. It can also be dissolved for failure to notify the Secretary within 60 days that you have changed your registered office or registered agent (or if you have not had an office or agent in the state for that long). A corporation can also be dissolved for not filing a license or occupation tax return within a year after it was due.
As you can imagine, it is quite a problem to wake up one day and no longer own a share of the company that you thought you had because it no longer exists. It technically does exist, but only in a state of limbo. When a corporation or LLC is dissolved, the owners have a duty to wind up its business affairs. This means that the assets need to be sold off or transferred and all the debts settled. If you are blissfully unaware of this dissolution — perhaps because you told everyone but the government where your new office is located — you will begin incurring personal liability for continuing to do business as usual. New business conducted is essentially done on behalf of the owners in their personal capacity rather than corporate capacity. Let’s not even get into the potential tax problems.
The liabilities resulting from doing business through a dissolved corporation or LLC are not all very clear. Who is responsible for a new loan? What happens to the real estate owned by the former legal entity? You may take the position that a certain debt is a corporate liability whereas a creditor would say that you are now personally liable. These answers require legal conclusions that can only come from a judge if you and other parties cannot agree what should happen. Now you are facing the prospect of litigation (and you may not be able to agree with the other business owners who is responsible for attorney’s fees for getting everyone out of this mess).
Changes of addresses, officers, and agents
You have a very strict duty to keep your information updated with the Secretary of State. This is important because lawsuits can be filed against you, and you have a duty to answer them or suffer the consequences of a default judgment. Without discussing all the ways that your corporation or LLC can be served with notice of a suit, let’s consider a worst-case scenario.
Normally the registered agent for your corporation can be personally served with a lawsuit. If your registered agent cannot be found because you do not have one or the address with the Secretary is out of date, then your corporation can be served by certified mail. Now if that address is out of date, guess who the plaintiff can serve next? The Secretary of State herself. And since you have not kept her office updated, you cannot count on her to let you know that you have been sued. Then you could suffer a default judgment.
It does not matter if the plaintiff knows where you really are and could make sure you know about the lawsuit. The plaintiff has no duty to look you up in the phonebook or search Google. Georgia courts have determined that your company, however, has a strict duty to keep its entity registration up to date. A default judgment could wipe out your business — and your personal assets could also be wiped out if your entity is dissolved and no longer limiting your liability.
The takeaway
Your annual registration for your LLC or corporation is due by April 1 to the Georgia Secretary of State. It costs $30 and can be paid by credit card online. You should update your information at this time and at any other time your registered agent, addresses, or officers change. Failure to make these updates can jeopardize your livelihood.
I hope that you manage your business well and found this article a little patronizing. Unfortunately, many business owners think that the Secretary of State just registers a name and bothers them with trivial clerical tasks each year. If you had a lawyer organize your entity, make sure she is checking with you soon to file your annual registration. If you do not know the status of your registration, you can find it online. If you are unsure of how to list a registered agent or other information, you may need legal advice for your situation.
What if my S Corp has an agreement with another S Corp to create an LLC but one party of the LLC(not me) is Administratively Dissolved by the SOS 5 months into our 1 year agreement, where does that leave the other partner/S Corp? Is our Memorandum of Understanding null and void as of the date of Administrative Dissolution? What about payments to that now defunct S Corp? Thank you
Obligations will not necessarily disappear, but the corporation’s powers may become impaired. Dissolution imposes duties to wind down the business, too. The solution to such a problem depends on the type of agreements in place and what the parties are willing to do to fix the problem.
What if you fail to renew your corporate name can somebody else register the same name and how long does that take if so?
Corporations and LLCs have five years in which they may become reinstated, so it appears that no one else can take the name during that time. (This is explicitly the case for an LLC, so I would suppose it applies to a corporation, too.)
If the name is really important to you, you may have concerns about trademark issues that you should explore.