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My LLC Isn’t Delinquent; It’s Just Misunderstood

This article was updated on 7/9/2020 to clarify the potential limitations for an entity with a delinquent status. 

Is your limited liability company, corporation, or other entity registered with the state delinquent? Not staying out past curfew or spraying graffiti on walls, but is it current with its annual report filing? If not, it could eventually be administratively dissolved. If your entity operates while administratively dissolved, the owners could have personal liability.

In Wisconsin, most registered entities must file an annual report with the Wisconsin Department of Financial Institutions (DFI). In most other states, the filings are done with that state’s Secretary of State. Historically, limited liability partnerships (LLPs) did not have to file annual reports in Wisconsin; however that changed in 2016. Now LLPs likewise are subject to Wisconsin annual reports.

DFI notifies registered entities by U.S. postal service shortly before their annual reports are due, but an entity can check the status of its filing online at https://​www​.wdfi​.org/​a​p​p​s​/​C​o​r​p​S​e​a​r​c​h​/​S​e​a​r​c​h​.aspx. If a registered entity fails to submit its annual report and pay the filing fee timely, eventually DFI will place the entity in Delinquent Status.” When in Delinquent Status, the entity will not be able to file any other documents with the Department until the entity is brought back to good standing by filing all past due and the current annual reports. An entity in delinquent status also may face challenges in bringing or defending a lawsuit.

Entities that remain in Delinquent Status too long are subject to being administratively dissolved. Prior to administrative dissolution, DFI attempts to contact delinquent entities by U.S. postal service at the registered agent’s address (one reason to ensure the registered agent and address is kept current with DFI). If the mailing cannot be delivered, the entity name is published in a Notice of Administrative Dissolution. If DFI does not receive the annual report within 60 days after the Notice publication, DFI may administratively dissolve the entity. The DFI periodically issues a Certificate of Administrative Dissolution list for such entities.

Once an entity is dissolved, it may be possible to bring the entity back to active status with DFI later, but the costs may be higher than staying current with filings. To bring the entity back, the entity must file a current annual report and pay the required filing fee, plus pay the fee for each prior year an annual report had not been filed.

A dissolved entity (regardless of the reason for dissolution) generally continues its legal existence for some time but may not carry on any business except that which is appropriate to wind up and liquidate its business. Inadvertent administrative dissolution could result in personal liability for any acts taken by or on behalf of the entity after dissolution, if such acts are other than to wind up and liquidate. Therefore, entities that expect to have continuing operations should take steps to ensure their annual reports are timely filed, to reduce the risk of personal liability to its owners.

If you have questions on filing your annual report or whether your entity is current on its filings, please contact your Boardman Clark attorney or our business paralegal LuAnn Peterson at 6082837542

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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