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How do I revive my North Carolina LLC after it’s been administratively dissolved?

What is administrative dissolution?

            In North Carolina, the Secretary of State requires every limited liability company (LLC) to file an annual report by April 15 of each year.  The LLC does not have to file an annual report the first year of its existence.  This is not an annual report in the sense of a complex, in-depth financial statement.  It simply states that the LLC is still in business, who the owners are, and whether the registered agent has changed.  As of 2017, the filing fee is $200 for print annual reports filed by mail or $202 for electronically submitted annual reports.  When an LLC fails to file its annual report, the Secretary of State will send the registered agent a Notice of Dissolution or an “ADM Notice.”  If the LLC still does not file its annual report, the Secretary of State will administratively dissolve the company.

What are the consequences of administrative dissolution?

When a North Carolina LLC is administratively dissolved, it ceases to exist for legal purposes.  The owners may continue carrying on business, but they need to be aware of great potential liability they are facing on multiple fronts.  First, there are significant tax consequences for the owner(s) of an LLC that has been dissolved.  Since there is no longer an entity that they are operating through, all of the LLC’s income will be taxed directly to them individually.  If their LLC was taxed as an S-Corporation under Subchapter S, they will lose this favorable tax treatment and feel the full impact of self-employment tax.  Second, the owner(s) of the company no longer enjoy the “limited liability” aspect of their previous limited liability company.  If someone slips and falls and sues them, the injured person may have full access to the owner or owners’ personal assets.  Even if no injury is involved, the owner(s) can face liability for contracts, leases, loans, and other agreements the company had entered into.  This is only the beginning of the immense liability LLC owners open themselves up to when their LLC is administratively dissolved.

How do I fix an administrative dissolution?

            Luckily, the North Carolina Secretary of State allows an administratively dissolved LLC to be reinstated.  Pursuant to §57D-6-06(c) of the North Carolina General Statutes, an LLC can apply for reinstatement following administrative dissolution.  The LLC must state the grounds for which it was dissolved and whether those grounds were incorrect or they have been remedied.  If an LLC has been incorrectly administratively dissolved, which almost never happens, the LLC will be immediately reinstated upon filing.  However, if the LLC was administratively dissolved for failure to submit annual reports, all missed annual reports must be filed to bring the LLC into compliance before filing for reinstatement.  While this can cost several hundred dollars, it remedies the situation and prevents the great liabilities above.

How can I prevent administrative dissolution?

            LLC owners can easily avoid administrative dissolution by filing their annual reports on time each year.  Notices from the Secretary of State are sent to the LLC’s registered agent.  If an individual is listed as an LLC’s registered agent, this should be a responsible person who will immediately address important notices from the State.  If the LLC was formed with LegalZoom or another online serve, the registered agent may be a paper mill or similar “corporation” that handles tens of thousands of companies’ documents.  The best solution is to have an attorney listed as your registered agent.  Attorneys know when an important notice crosses their desk.  At Barber Power Law Group, our attorneys stay on top of our clients’ filings to ensure their companies remain in full compliance.  Additionally, as registered agents, we will immediately contact you if you ever receive legal notice of a lawsuit or other matter.  Don’t leave this to chance – prevent dissolution by naming an attorney as your registered agent today.

Jonathan Barber