In my last blog, I explained and tried to offer general information and advice about the consequences that ensue if your Texas corporation, LLC or LLP misses the deadline for filing a report or making a payment to the Comptroller for the company's franchise tax. Those consequences may include termination of the Texas entity.
In this post, I want to offer a different kind of information and advice — GOOD NEWS!
The good news is that — in most situations — it is possible to remedy the delinquency and get your entity reinstated with the Secretary of State. Reinstatement won't always fix all problems — the biggest being the imposition of personal liability for company debts, which in some cases can become irredeemable— but reinstatement will get the entity back in the state's good graces, and the personal liability exposure will stop expanding.
Assume the worst happened — the Comptroller certified to the SOS that the company's corporate privileges were forfeited and the company failed to revive itself within 120 days of the forfeiture date, and the SOS then terminated the company's charter.
Revival, or reinstatement, is still possible. You should contact the Comptroller's office and verify the reason for the delinquency and what is required to cure it. With that information, you can complete and submit the missing reports and pay the past due amounts (making sure to get a "payoff" number from the Comptroller that includes all taxes, interest and penalties). When you deliver the missing reports and pay the delinquent amounts, you will ask the Comptroller for a "tax clearance letter," which essentially says that the company's account is cleared up.
Remember that the company itself is "dead," so it requires a director, officer or shareholder of the company (if it was a corporation) or individuals holding corresponding roles of the company (if it was an LLC or a LP) AT THE TIME OF FORFEITURE to formally request the SOS to set aside the forfeiture (done on a form prescribed by the SOS); you include the tax clearance letter as an attachment to that written request.
The SOS will then reinstate the company and you are back in legal shape to resume business!
The company's filing history, which is publicly available, will always show that the company's corporate privileges were forfeited and its charter subsequently terminated, and will also show the reinstatement. But because most third parties seem unaware of the personal liability consequences which can arise upon forfeiture, and are frequently uninterested in performing due diligence on a company's non- financial history, it is possible that third parties that deal with the company in future transactions won't make themselves aware of the company's past forfeiture or worry about what problems might arise to the company's insiders from that lapse.
One step that sometimes trips up people trying to reinstate their Texas entity is that during the interim when the company's charter was forfeited, another company takes their corporate name. (Remember, again, that a company which has had its charter forfeited is "dead" and it has ceased to hold any right to its corporate name.) If that has happened, then your company cannot be reinstated under its old corporate name — someone else has it. In conjunction with your written request for reinstatement, you will have to submit to the SOS an amendment to the company's certificate of formation to formally change your company's name.
The other condition you should bear is mind is that the reinstatement should be accomplished before the third anniversary of the date your charter was terminated.
Sometimes the owner of a company which has been terminated assumes that he cannot revive or reinstate the old company, so he instead forms a new one. He should be aware that revival is not just a possibility but can be a better, less expensive choice that continues the old company as though the termination never occurred.