Forfeited Companies May Still Owe Taxes


Sometimes a Delaware entity will unfortunately end up in a defunct status.  For example, the registered agent of an entity has the option to file a resignation, which would cause the company to be in a forfeited status.  A registered agent may perform this type of filing for various reasons.  Typically, a resignation is filed if an entity does not pay the registered agent fee that is due annually.  Occasionally, a client will specifically request that their entity be resigned upon because they are no longer in need of an active company.

Once a company is in a forfeited status, it is no longer considered to be active and in NOT in good standing with the State of Delaware.  Clients in this situation often ask if they are still required to make payment arrangements for their annual franchise tax fees.

Every entity situation is different, but here are a couple general guidelines:

What if you are not interested in keeping the entity once it has been forfeited?  Any franchise tax fees that may be due would be dependent on when the entity was resigned upon.  If the company already had franchise tax fees imposed at the time of the resignation filing, then those outstanding fees would remain with the entity. The past due franchise tax fees do not simply “go away” because the company is in a forfeited status. However, the forfeit entity would not incur any new franchise tax fees either.  The State of Delaware does not impose annual franchise tax fees on entities that are forfeited or in forfeit status.

But what if the company is forfeit and you actually need it to be in good standing?  If you want to restore the entity, then a Certificate of Renewal would have to be filed and all past due fees would have to be paid.  There is a costs associated with filing the renewal and the past due fees are franchise tax fees, penalties and interest, filing fees, registered agent fees.

If you have a forfeited company, call us at Harvard Business Services (1-800-345-CORP) for a free consultation. We will provide you with the exact details regarding your Delaware company.  Once you have all the necessary information, then you can decide how best to proceed.

More By Amy Fountain
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