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Old 10-20-2014, 09:14 AM   #1
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Lightbulb Doing business in the US - check the company standing

Before doing business - always check a company's status
Does anyone have other experience for a company not being in good standing.

In the US, a small business often creates a LLC (limited liability company) or a full blown company (company, Inc., ...) through the State is resides in. The idea is to receive a Federal Tax ID for opening a bank account to do business outside one's personal bank account.

The idea of some company is to limit one's personal libality.
I am surprised that many people don't understand this is a yearly renewal. The State Governments get a lot of revenue from this and in return recgonize your business and provide protection.

If a company pays the fees and makes a yearly report, the company is in Good Standing. Otherwise, the company (or LLC) status can be changed to something like NOT IN GOOD STANDING.

For example: I had a company and individual who claimed to represent that company threaten me about some type of software license they claim affected me. Besides questioning the documentation provided at a personal level, I got on thier State Web Site and looked up the company they claimed to own and be President of. They have not been in Good Standing since before 2010.
States won't remove a company for many years. For a company to return to good standing, they typically require a penality and all past fees be updated. That cost money and time.
So, my choice was not to respond since my personal idea is that they can not bring a lawsuit. Also, if they go through the process of being in Good Standing, there are many articles that indicate any contract, agreement, invoice, or other business conducted during the time they were not in good standing is basically void as well.
Based on this, it is a good idea to keep a copy that they are not in good standing.

For this same reason, for you as a small business, keep in Good Standing.
When an LLC is closed, be sure to notify the State too.

Disclaimer: I am NOT an attorney and this is not legal advice
It seems unlikely that an LLC not in good standing can BRING a lawsuit. These codes vary from state to state but have an extremely common thread for all states:
 4A-920. No bar to valid acts or defense of suit.
The forfeiture of the right to do business in Maryland and the right to the use of the name of the limited liability company under this title does not impair the validity of a contract or act of the limited liability company entered into or done either before or after the forfeiture, or prevent the limited liability company from defending any action, suit, or proceeding in a court of this State.

The italics are mine. Since the statute expressly states that the LLC can defend an action but makes no provision for the LLC to institute an action, I think it is unlikely that an LLC that is not in good standing can bring a lawsuit.

However, if the LLC is canceled and is winding up in accordance with the statute, I believe that the answer might be different.  4A-908(b) provides:
Winding up.- Notwithstanding the filing of articles of cancellation, the limited liability company continues to exist for the purpose of paying, satisfying, and discharging any existing debts or obligations, collecting and distributing its assets, and doing all other acts required to liquidate and wind up its business and affairs.

Disclaimer: I am NOT an attorney and this is not legal advice.
Regarding a company that has not been in good standing for over 2 years (the standard time for a Statue of Limitations) and then file to Cancel the company, it is doubtful they will be as motivated to make collections. Basically, if there was something owed or in possession and no lawsuit of legal action filed in 2 years, the courts are not going to consider it.

Disclaimer: I am NOT an attorney and this is not legal advice.
Always consult an attorney, these are some basic concepts that may help you do some research in preperation for a meeting with the attorney.

Last edited by Rx_; 05-16-2018 at 05:45 AM.
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