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Barrister
Barrister, Attorney
Category: Business Law
Satisfied Customers: 34262
Experience:  16 years practicing attorney, JD, BA, MBA
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I have an LLC that has basically been dormant for 5 years and

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I have an LLC that has basically been dormant for 5 years and is actually suspended for not paying minimum tax each year. A frivolous lawsuit was filed against me, and they included the LLC. Can I file a demeurer on behalf of the LLC, as it is ludicrous to have to hire legal counsel for an entity that is not doing any business...as a follow up, what if the LLC simply does not respond to the lawsuit...and finally can I simply dissolve the LLC in the midst of this nonsense....

Hello,

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No, since this is a corporate entity, it would have to be represented by an attorney in order to file any response.

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The next problem is that an LLC that has been suspended can not defend any legal action against itself until it has been reinstated. So even if you hired an attorney, he couldn't do anything until the LLC has been reinstated by CA.

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From the CA Franchise Tax Board: "In addition, we can assess a penalty on corporations that continue to do business while they are suspended or forfeited."

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Further... Effects of Suspension and Forfeiture

When a corporation or LLC is suspended or forfeited it loses its powers, rights, and privileges. A suspended or forfeited corporation or LLC cannot:

  • Legally transact business.
  • Enforce contracts.
  • Bring an action or defend itself in court.
  • Be granted an extension of time to file.
  • File a claim for refund or amended return.
  • File or maintain an appeal before the Board of Equalization.
  • Begin or continue to protest an assessment.
  • Sell, transfer, or exchange real property.
  • Keep their exclusive rights to the entity's name.
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In addition, corporations may be subject to a $2,000 penalty while doing business while they are suspended or forfeited.

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If you do nothing, then the LLC can get a default judgment entered against it for failing to respond to the complaint. But if it has no assets, it doesn't really matter because there is nothing to get.

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And finally, no you can't dissolve an LLC if there is a pending legal action against it. One of the questions you have to answer in any petition for dissolution is if the LLC has any pending legal actions against it.

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thanks

Barrister

 

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