Yesterday’s post concerned the two circumstances in which the Secretary of State might suspend a corporation. The California Franchise Tax Board will suspend a corporation if it fails to pay taxes, penalties, fees or interest (Cal. Rev. & Tax. Code § 23301) or fails to file a return (Cal. Rev. & Tax. Code § 23301.5).

These suspension provisions also apply to a foreign taxpayer if (and only if) it is “qualified to do business” in California. Cal. Rev. & Tax. Code § 23301.6.  The phrase “qualified to do business” in the statute, however, is inapt.  Under the General Corporation Law, a foreign corporation qualifies to “transact intrastate business”.  Cal. Corp. Code § 2105.

The consequences of suspension by the Franchise Tax Board are significant.  According to the Franchise Tax Board, a suspended corporation may not:

• Legally transact business

• Bring an action or defend itself in court

• Receive an automatic extension of time to file

• File a claim for refund

• File or maintain an appeal before the Board of Equalization.

• Begin or continue a protest

• Legally close or dissolve the business

In addition, a suspended corporation may lose its right to revive under its own name if another corporation appropriates its name during the period of suspension.

In a future post, I’ll discuss how to revive a foreign corporation from suspension by the Franchise Tax Board.