The May 1 deadline for filing the Annual Report for legal entities formed in the State of Florida is approaching. Whether you own or operate a corporation incorporated in Florida, a limited liability company organized under Florida law, or a general or limited partnership formed under Florida partnership law, your annual report is due by May 1. Failure to file that annual report by the deadline will result in costly penalties paid to the State of Florida, can result in unnecessary litigation, and may give a court a basis to “pierce the corporate veil” and create unexpected (and undesirable) personal liability for business activities against the individual owners of the business entity.
All legal entities organized under Florida law must file the Annual Report, and pay the annual fee, to remain an active legal entity. If the Annual Report and filing fee are not submitted on time, there is a meaningful penalty that must be paid with a late filing. If the filing is not made within a relatively short period of time after the May 1 deadline, the Florida Division of Corporations will administratively dissolve the legal entity, whether corporation or limited liability company. An administratively dissolved corporation or limited liability company is deemed to remain in existence, but there can be fairly serious consequences for the owners of such a dissolved legal entity.
Florida Statutes, Section 607.1421 provides the following with respect to an administratively dissolved corporation:
(3) A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under s. 607.1405 and notify claimants under s. 607.1406.
(4) A director, officer, or agent of a corporation dissolved pursuant to this section, purporting to act on behalf of the corporation, is personally liable for the debts, obligations, and liabilities of the corporation arising from such action and incurred subsequent to the corporation’s administrative dissolution only if he or she has actual notice of the administrative dissolution at the time such action is taken; but such liability shall be terminated upon the ratification of such action by the corporation’s board of directors or shareholders subsequent to the reinstatement of the corporation under ss. 607.1401–607.14401.
(5) The administrative dissolution of a corporation does not terminate the authority of its registered agent.
There are at least two quite significant that are immediately apparent from cited statute. First, a dissolved corporation is no longer authorized to carry on its business, except to wind up and liquidate its affairs. That suggests that any continued carrying on of its business is subject to legal attack for violating the statute.
The second and more frightening prospect for the business owner is in subparagraph (4). Any director, officer or agent of a corporation that is administratively dissolved, acting on behalf of the corporation, is personaly liable for “the debts, obligations, and liabilities of the corporation,” if the individual has actual notice of the administrative dissolution.
There are similar Florida statutes dealing with limited liability companies, general partnerships and limited partnerships.
The importance of filing the annual report is illustrated by a recent case involving one of our clients who relied on his administrative assistant to file the annual report for his limited liability company. Apparently, she failed to file the annual report. When the notice of the administrative dissolution was received, she filed it away in her “things to do” file. She never got around to filing the annual report, apparently concerned that the penalty assessed would create problems for her when she presented it to her employer. Sometime after the administrative dissolution, the company, which was doing very well financially at the time, renewed it’s lease on several thousand feet of office space. Three years later, the economy went into recession and the company ceased doing business. The lease renewal was signed by the president and owner of the company, as president of the company. The landlord filed suit against the company and the president/owner of the company, individually, for the unexpired term of the lease. After almost two years of litigation and tens of thousands of dollars in attorney’s fees, a judgment was recently entered against the president/owner, individually, for over $300,000 for the company’s unpaid lease obligation.
Be aware also that the notice of administrative dissolution now can be communicated by electronic mail (email) to the email address provided to the Division of Corporations by the legal entity. Florida law also provides that transmission and receipt of electronic communications constitutes “actual notice.”
Every business owner operating through a legal entity established under Florida law should take steps to ensure that the Annual Report for their legal entity is filed timely, and should be vigilent in reviewing all emails from the Florida Division of Corporations so that a notice of administrative dissolution can be recognized and an appropriate response provided should that event occur.
We offer our business owner clients a service that includes monitoring the timely filing of the annual report and communications from the Florida Division of Corporations and serving as the registered agent. We have found that many of our business owner clients prefer to “insure” the timely filing of the annual report and prompt responses to communications from the Division of Corporations through their counsel, rather than rely on sometimes transitory employees, and to avoid having a Sheriff’s office deputy delivering legal papers to their place of business. If you are a business owner and your internal systems cannot ensure the timely filing of the annual report, you may want to contact your counsel about providing similar services.
But whatever, you do, don’t forget to file your annual report by May 1!
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