In the immortal words of The Rolling Stones, “You can’t always get what you want.” Yet, with an increased understanding of what is available, timing issues and terminology used, you do have many of the resources to get what you need. The public information on Secretary of State, Comptroller and tax department websites can be very valuable first places to look as you prepare for your next due diligence or internal audit project.
The following are a few examples of the state differences in procedures and terminology:
If an entity misses a report it will be in a “non-compliant” status for some period of time before it becomes involuntarily or administratively dissolved.
The state of California has a number of different statuses based on the entity’s status with the SOS and the Franchise Tax Board. Fortunately, the California website does have a handy link to status definitions: http://www.sos.ca.gov/business-programs/business-entities/cbs-field-status-definitions/#status.
In Louisiana, a status may be “Withdrawal pending” for a long period of time (sometimes it can be years) until the withdrawal filing is accepted.
Maryland shows a “pending” status when an entity’s personal property return has not been submitted. The entity will eventually be moved into a forfeited status.
The term “automatic withdrawal” is used when an entity’s Certificate of Authority has been revoked for failure to file an annual report. The problem with using this terminology is that it conflicts with actual filings performed by the state. This may be confusing as one may be under the impression that the entity had been dissolved, only to discover that a filing was not actually submitted.
An entity will go into a “default” status and, after an unspecified period of time, will ultimately be moved into a “revoked’ status.
The status most commonly listed in North Carolina is “Current-Active” which may be confusing as an entity may still be “Current-Active” even when reports may be past due. Additionally, North Carolina requires a report filing for each year that the entity is registered (for example, if the 2014 report was missed, the entity will be behind unless two reports are filed to catch up). Finally, should the annual report not be submitted electronically, paper filings are first sent to the Department of Revenue and are marked as Pending during the review process, which may be 6-8 months before the state website is updated on the status and the report is listed as accepted.
An entity can be placed into an ‘Inactive – Revoked (Administratively)’ or an ‘Inactive – Revoked (Revenue)’ status. This may be confusing if a client is unaware that both an annual report and tax payment are due.
Statuses between the Comptroller’s website and the Texas Secretary of State site can be contradictory. An entity can have a status of “franchise tax ended” or “not established” on the Comptroller’s website, but then be “in existence” with the Secretary of State site.
Washington statuses are black and white. An entity is either Active or Inactive which makes interpretation very simple. Unfortunately, this also means you are unable to tell if it’s inactive because it’s delinquent, revoked, dissolved, or withdrawn from the website alone.
The West Virginia website does not list a status, nor are you able to see a complete list of filings. From the entity search screen, you can see in the search results section a termination date and reason.
In addition to the above examples, there are a number of states where the same status may have different meanings for delinquent required reports such as annual/periodic reports. For example, Indiana and Arizona use the status of ‘administratively dissolved,’ while Illinois will use the status ‘involuntarily dissolved’ (or sometimes just dissolved) to describe an entity that has failed to file its annual report. The state filings must be reviewed to determine if the entity was dissolved by the Secretary of State for failure to file the most recent year’s annual report.
The good news is that your registered agent company works with Secretary of State offices, comptrollers and tax divisions frequently and can also assist with obtaining Good Standing Certificates and tax status certificates, if required, when you need to verify/confirm the status in any state.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.