Trepanier MacGillis Battina P.A. 8000 Flour Exchange Building 310 Fourth Avenue South Minneapolis, MN 55415 612.455.0500
Trepanier MacGillis Battina P.A. 8000 Flour Exchange Building 310 Fourth Avenue South Minneapolis, MN 55415 612.455.0500

Annual Business Renewals Will Prevent Administrative Dissolution by Secretary of State

In Minnesota, corporations and limited liability companies must meet annual renewal requirements administered by the Minnesota Secretary of State or risk administrative dissolution. If an entity fails to file its annual business renewal, the Secretary of State will promptly file a certificate of administrative dissolution. While this dissolution may not be fatal, it can hinder the business, result in unnecessary burdens and expense, and potentially leave shareholders or members liable to the company’s creditors.

Effective January 1, 2008, the Secretary of State must administratively dissolve any corporation that fails to file its registration during the previous calendar year. Prior to the amendment, a corporation would not be administratively dissolved unless it had failed to file its renewal for two consecutive years. Additionally, under prior law, the Secretary of State was required to send the corporation a notice informing it of the dissolution and describing the process for reinstatement. Currently, no such warning letter is sent. After December 31, a registered entity is administratively dissolved if the proper steps have not been taken to renew the business’ registration with the Secretary of State.

How to Verify Your Business is “Active” and in “Good Standing”
The Minnesota Secretary of State allows the public to search business registrations. As part of the registration search, users are able to determine whether the business is both “Active” and in “Good Standing.” If the business detail page shows both “Active” and in “Good Standing” with the current year listed in the renewals, then no further action is necessary. However, if the page displays “Inactive” or “Good Standing,” but the current year is not listed as one of the renewal dates, then a reinstatement or renewal must be filed. Annual renewals, prior to an administrative dissolution, can be filed online for no charge. After an administrative dissolution, the annual reinstatement costs $45.00.

Voluntary Dissolution
Often, start-ups and companies wishing to cease operations will fail to renew a business registration. This failure, however, does not formally terminate the business. Administrative dissolution merely suspends corporate existence until the business can be reinstated or voluntarily dissolved. Businesses that have been administratively dissolved are still liable to creditors and claimants. Additionally, shareholders or members may be liable for distributions received from the administratively dissolved business. Under both the Minnesota Business Corporation Act and Minnesota Limited Liability Company Act, proper steps must be taken for a business to be voluntarily dissolved and wound down. Without following these steps and properly notifying the Secretary of State and creditors, a business – and potentially its shareholders or members – may still be liable for the obligations of the business.

Corporate renewals may not initially appear to be a high-priority issue. This annual requirement is often put off for another day, or even ignored. For active businesses, filing your annual renewal can prevent future problems for the business and its owners. For inactive businesses, the proper course of action is to follow the procedures for formal dissolution. Following these steps can minimize potential shareholder or member liability to potential creditors of the corporation or LLC.

For advice on business renewals, avoiding administrative dissolution, statutory dissolution, and other issues facing your business, contact the business law attorneys of Trepanier MacGillis Battina P.A.
About the Author:
Minneapolis corporate attorney Jim MacGillis advises clients on corporate and business law matters such as business transactions, creditor strategies, and corporate governance. Jim may be reached at 612.455.0503 or Trepanier MacGillis Battina P.A. is a Minneapolis corporate law firm located in Minneapolis, Minnesota.