What is an administratively dissolved entity and what does it mean?
The time has come where you decided to make your dream a reality by hiring Makris Legal, P.A. to open your entity, to serve as your entity’s designated registered agent, and to help set up your business for success. Whether you have a for profit corporation, limited liability company, limited liability partnership, a limited liability limited partnership, or another entity structure, there are certain requirements that must be met in order to avoid your entity from being administratively dissolved.
To start, what exactly does it mean when an entity is administratively dissolved? An entity is administratively dissolved by the Florida Department of State Division of Corporations whenever the entity does not meet certain requirements. There are different requirements for each entity structure, but the common requirements that all for-profit entity structures share are:
1. If the entity does not deliver its annual report to the department by 5 p.m. Eastern time on the third Friday in September of each year;
2. Pay a fee or penalty due to the department;
3. Appoint and maintain a registered agent and registered office; and
4. Deliver for filing a statement of change within thirty (30) days after the change occurred for the registered agent.
Whenever an entity is administratively dissolved, the entity still continues in existence, but it may only participate in activities necessary to wind up its activities and affairs, liquidate and distribute assets, and notify claimants with claims against the administratively dissolved entity. If an entity does any other activities outside of these specific activities, then there could be consequences for the entity owners, officers, and managers. The biggest consequence of operating under an entity that has been administratively dissolved is that the officer, owner or manager who continues to operate under the administratively dissolved entity will incur personal liability and lose the benefit of the “limited liability” protection through the doctrine of “piercing the corporate veil.”
For example, Larry has a Limited Liability Company where he operates his bakery. Larry did not hire Makris Legal, P.A. to serve as his designated registered agent and decided to be his own. He forgot to file his annual report before the cut off dates and his Limited Liability Company is now administratively dissolved. Shortly after, Larry made a batch of his most popular and best selling cookies. Unknown to Larry, his supplier supplied him with bad eggs. Shortly after selling out of those cookies, multiple customers ended up getting sick and sued Larry and Larry’s company, and those customers won the lawsuit and were awarded damages against Larry personally. Since Larry’s company was administratively dissolved, Larry was not able to utilize the benefits of having an active limited liability company to absorb the liability for unknowingly using bad eggs and making his customers sick.
Another consequence of an administratively dissolved entity is that the entity cannot bring a lawsuit or proceeding against another party. For example, after Larry was found personally liable for getting his customers sick, he decided to go after the egg supplier. Unfortunately, since Larry never reinstated his entity, he is unable to bring a lawsuit against the egg supplier to recover damages.
In Florida, an entity’s annual report is due before May 1st. If the entity is reinstated after that date, the entity is required to pay a $400 late fee along with their annual report. Additionally, if an entity does not file their annual report before the third Friday in September, then the entity will be administratively dissolved. It is important to remember these dates in order to avoid more headaches. If you would like more information or would like to retain Makris Legal, P.A. to serve as your designated registered agent, click here.