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Steve Sims, Taxpayers' Rights Advocate.

Consider a Company “Status” When Buying or Selling

If your client is looking to buy or sell a company, they should consider the company’s “status” before they sign that dotted line. If a business has not kept up-to-date records and handled their financial obligations, their liabilities may be passed onto you. Businesses in active status are in good standing with the state of California. Companies that are “suspended or forfeited,” could mean your client may incur their debt, liabilities, and any other taxes. For companies that have failed to file, the purchaser may also be responsible for previous years’ tax returns and any associated tax liability. This information is located at the Secretary of State’s website. Searched the entity name and you will find a list of statuses which tell you the company’s current standing is with the State of California. Here are some important criteria to notice when checking the “status” of a company:

  • Active:
    • Domestic entities – The domestic entity has filed its formation document in California and is authorized to carry out its business activities.

    • Foreign entities – The foreign entity has registered and is authorized to transact intrastate business in California.

  • Suspended or Forfeited: The business entity's powers, rights, and privileges were suspended or forfeited in California 1) by us for failure to file a return and/or failure to pay taxes, penalties, or interest; and/or 2) by the Secretary of State for failure to file the required Statement of Information and, if applicable, the required Statement by Common Interest Development Association. Information regarding the type of suspension can be obtained by ordering a status report.

  • Dissolved: Domestic corporations – The business entity filed a Certificate of Dissolution and the powers, rights, and privileges of the entity have ceased in California.

  • Surrender: Foreign corporations – The business entity surrendered its right to transact business in the state of California.

These are only a few things to consider when buying or selling a company, so make sure to research and take all the steps necessary. Also, you can use our new Self-Serve Entity Status Letter online application to receive an entity status letter discloses whether or not a business entity is in good standing with us.

Steve Sims, EA
Taxpayers’ Rights Advocate

Follow me on Twitter at twitter.com/FTBAdvocate.

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