Administrative Dissolution in Florida
Annual Reporting Requirement
Annual reports for all Florida entities are due to the Florida Secretary of State no later than May 1 of each year. If you do not file your annual report, a $400 fine is imposed. If the fine is not paid and the annual report is not filed by the third Friday in September, then the entity will be “administratively dissolved.” (F.S. 607.1420(1)(a)).
What does it matter if my entity is “administratively dissolved?”
The Florida Statutes provides a little clarity into three dreadful things that happen when your entity is administratively dissolved:
- A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs and notify claimants. F.S. 607.1421(3)(corporations) 608.4481(3)(LLCs)
- A director, officer, or agent of a corporation (or manager or member of an LLC) dissolved pursuant to this section, purporting to act on behalf of the corporation, is personally liable for the debts, obligations, and liabilities of the corporation (or LLC) arising from such action and incurred subsequent to the corporation’s (or LLC’s) administrative dissolution only if he or she has actual notice of the administrative dissolution at the time such action is taken; but such liability shall be terminated upon the ratification of such action by the corporation’s (or LLC’s) board of directors or shareholders (members) subsequent to the reinstatement of the corporation (LLC). F.S. 607.1421(4)(corporations) 608.4481(4)(LLCs)
Another person can use your company name after your company has been administratively dissolved for more than one year. F.S. 607.1422(4)(corporations) 608.4482(4)(LLCs)
So… to sum up… your entity can’t do anything but liquidate itself and anytime anyone (you) purports to act on behalf of (sign something for) the company, it is really you personally who is on the hook for it, provided you have actual notice of the administrative dissolution. And if you don’t know about the administrative dissolution, then that is evidence that you are not properly managing the company. So, unfortunately, either way you are likely to have some upset people on your hands. Either the creditors or the shareholders.
My Entity is Administratively Dissolved. What are My Options?
You have three options: 1) Pay the $400 fine plus the annual report amount(s) and apply to the Secretary of State for reinstatement, 2) Form a new entity and transfer all assets and liabilities to that new entity, or 3) Walk away and not use the entity any more.
There are positives and negatives to options 2 and 3 above. A new entity could be complicated from a tax perspective. Assets and liabilities could be difficult to transfer to a new company. However, when faced with paying thousands in years’ annual report filings, there may be some usefulness to simply forming a new entity. Situations will vary dramatically. Please contact your attorney for more specific advice.
I hope this article is useful to you. I welcome recommendations for future articles.