How realistic is it to resurrect a dormant C corporation

Question

Assume that someone formed a C-Corp around 15 years ago in Texas. Then they let it go dormant with the state by not filing any of the required paperwork nor paying any fees. The SoS of Texas lists the corporation as inactive. The corporation never brought in money in its name. Nothing was filed with the IRS.

The C-Corp was filed in Texas by a Texas resident. The filer still lives in Texas.

How realistic is it to resurrect that corporation? Would each and every year's reports need to be filed, and fees paid to the IRS and the state? Or could it just be reported as inactive and brought up to date? I can't find the answer to this online or at the SoS page.

Would it just be more expedient to form a new LLC or Corp? Will the SoS check the stockholders of the old C corp and disallow them to form a new corporation until the old one is dissolved or brought current?

Answer 1

Would it just be more expedient to form a new LLC or Corp? Will the SoS check the stockholders of the old C corp and disallow them to form a new corporation until the old one is dissolved or brought current?

It would make more more sense to start over from scratch, even if there is a fairly efficient way of dealing with the issue at the state law level.

The administrative dissolution in Texas freed up the old name, a tax return has to be filed every year for a C-Corporation with the IRS whether it does anything or not, and there could be a de minimis failure to file fee for each of those years. The statute of limitations doesn't start to run until some return of some kind is filed.

You also implicate a different and more complicated set of tax rules when a C corporation transitions to be an S corporation if that is what you want to be, than you do if you start from scratch.

And, explaining to creditors why the company is fifteen years old according to the SOS but has no financial statements from that time period isn't something you want to have to explain over and over and over again as you seek financing.

Whether it should be an LLC or Corp depends upon what you want to do in the business and who will own it and how it will be financed, there is not a general rule.

Answer 2

It's quite realistic, and fairly easy to do (whether it's inexpensive depends on how much tax the corporation owes, of course!) From the Northwest Registered Agent site (I have no affiliation with them; they're just the first relevant result):

• If the corporation owes taxes, or was in non-compilance, fill out Form 801, Application for Reinstatement and Request to Set Aside Tax Forfeiture and get a tax clearance letter from the Texas Comptroller of Public Accounts. According to the page I linked, this form has a $75 processing fee.

• If the corporation was voluntarily made dormant up to three years ago, you can fill out Form 811, General Information (Certificate of Reinstatement). This is also subject to the processing fee.

From what you indicated, as the corporation has been dormant for more than three years and there were no irregularities, it appears that you will have to start over.