Many business owners or executives wonder what will happen if a corporation or LLC fails to comply with the annual requirements. Whether the business is run by a single owner or involves a number of officers, directors, and shareholders, complying with the annual requirements for businesses will not only keep the business in compliance with the law, but will avoid the appearance that the entity is a “shell” company and that personal liability should be imposed on the individual executives, officers, or shareholders.

Generally, the consequences of failing to comply with annual requirements can range from the following:

  • Corporation or LLC can be subject to “piercing the corporate veil” for failing to adhere to the corporate formalities, meaning that the owners are vulnerable to personal liability
  • Corporation or LLC can be suspended or otherwise penalized for not being in good standing with the State.
  • The Secretary of State or Franchise Board can impose late fees, interest payments, penalties, and other monetary fines.
  • The State can administratively dissolve the company for failing to comply with the legal requirements



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