Under California law a corporation can “die” after it outlives its usefulness. There’s a procedure to wind down and dissolve the entity. A corporation can also be suspended if the corporate owners fail to keep up the formalities or file taxes to keep the entity legally viable.
If that happens the corporation is suspended by the Franchise Tax Board (FTB) and it can’t legally conduct business. The Secretary of State (SOS) may also suspend a corporation for failure to reimburse the Victims of Corporate Fraud Compensation Fund for a paid claim or failure to file the annual Statement of Information.
Suspension means the corporation loses its rights to its name. In California it’s also a crime (a misdemeanor) for someone to transact, or try to transact, business through a suspended corporation. Contracts involving a suspended corporation can be voided and it can’t sue or defend itself against lawsuits. If a suspended corporation loses those rights but if it enters into a contract while it’s suspended, the business cannot enforce that contract unless it gets relief from contract voidability.
What happens if the suspended corporation gets a check? If it’s large enough to be worthwhile in order to cash it you need to reinstate the corporation and breathe legal life back into it. This requires,
- Payment of unpaid taxes, applicable penalties, fees and interest, and
- Filing of delinquent returns and an Application for Certificate of Revivor to the FTB.