Do you have to renew your LLC every year?
This is an often-asked question among new entrepreneurs still learning the ropes. Now, when it comes to business structures, one of the most commonly used is the Limited Liability Company (LLC).
Like other structures, this confers multiple advantages. Because the topic starts with a question, we aim to provide comprehensive answers.
If you’re reading this, all you need to do is stick with us to learn all there is to know about LLC renewal and why such renewal is important if found to be necessary.
What’s an LLC?
As stated earlier, an LLC is a legal entity that provides the same legal & financial protections that corporations do. This business structure is allowed by state statute.
It’s the United State’s version of a private limited company.
The advantage of the LLC is that it combines the pass-through taxation of a sole proprietorship or partnership with the limited liability of a corporation.
Under this legal entity, owners are referred to as “members.” This provides a cover or protection for personal assets.
Qualifying for LLC Issuance
Before answering the renewal question, it’s necessary to provide information on the qualifications for an LLC.
In other words, who’s eligible to apply for an LLC? LLCs can be formed by anyone seeking to leverage associated benefits or privileges conferred by such.
LLCs can be formed or established by individuals or groups of individuals, corporations, partnerships, and even other LLCs. In terms of requirements, LLCs don’t have any for the most part, except for professionals in healthcare, accounting, and law.
Do LLCs Need Yearly Renewal?
Here’s the crux of our discussion: determining if LLCs need to be renewed yearly.
First, most United States states require LLCs to be renewed. The second part of the question is whether LLCs need yearly renewal. LLCs do need to be renewed yearly.
Having answered the question, we need to get into specifics that include providing information on the consequences of failing to renew an LLC, the advantages of renewal, the renewal process, applicable fees, and situations (if any) when LLCs don’t need to be continued. Read on to find out.
i. Consequences of Failing to Renew an LLC
They have established that LLCs have a yearly validity; what consequences exist for failing to renew? There are several such.
While implications for non-renewal of LLC may vary from one state to the next, they mainly involve fines & penalties and the loss of legal protection.
Other possible consequences of not renewing an LLC include challenges in the resolution of disputes, reputational damage for the business, and exposure to increased investigations & audits.
You may also be unable to sue or defend against lawsuits when needed.
Non-renewal of your LLC may also lead to challenges in dissolving the entity. There’s also difficulty in doing business and the near-impossibility of obtaining permits & licenses.
ii. Benefits of LLC Renewal
Just as there are consequences to the non-renewal of LLCs, renewal brings various benefits.
These include limited paperwork requirements and easier access to financing. More benefits include business name protection, guaranteed continuity, flexibility, and tax benefits.
More advantages of LLC renewal include the protection of member interests, added credibility, and legal protection. These are clear benefits no entrepreneur will want to lose by non-renewal of their LLC.
In other words, you have everything to gain by renewing your LLC when due.
iii. LLC Renewal Process
We stated earlier that LLCs are renewed on a state-by-state basis.
In other words, an issuing state has guidelines for issuing and renewing LLCs. While that is true, there’s a general guideline that fits the renewal requirements of most states. It includes the following:
Looking up your state’s LLC requirements will go a long way in helping you carry out the process with little to no challenges. There’s also a need to prepare the required documents.
Your state will mainly highlight information on such documents. Make inquiries to find out.
What more? The renewal process for an LLC also includes payment of renewal fees. Again, the amount for renewal isn’t universal across all states. An inquiry about your state’s renewal fee will be the ideal thing to do. There’s usually a deadline within which to effect such payment.
Upon making the payment, the next step is the submission of paperwork.
It’s common to be issued a renewal form to fill out during renewal. Relevant information will need to be filled in. It’s essential to make inquiries when unclear.
Upon submission of your LLC renewal paperwork, there’s a waiting period for confirmation. Typically, this won’t take long. Also, an update of LLC records is necessary to show your LLC has been renewed.
The LLC renewal process isn’t complicated and is much easier than when you initially applied.
iv. Applicable Fees
Different scenarios may affect how much is paid when renewing your LLC and other applicable fees. Examples include late renewal fees, standard renewal fees, annual report fees, expedited processing fees,
Regarding exact fee amounts, this isn’t uniform across all states. In other words, you’ll need to find what’s applicable in your state. Information on this can be sourced by performing simple research online.
Every state has its procedures well documented online.
v. Situations (if any) that Allow for Non-Renewal of LLCs
Are there unique situations that allow members not to renew their LLCs but still function usually?
Not really! Renewal is a standard requirement all must adhere to. However, there are situations where LLCs aren’t renewed and cease to be functional.
These include bankruptcy, court order, expired term, dissolution, failure to file, and breach of an operating agreement.
LLCs may also be prevented from renewal when there’s a misuse of the structure or suspected fraudulent activity. A dormant LLC may also lead to its operation being restricted.
These are unique circumstances that affect the smooth functioning of an LLC. While that is true, non-renewal will lead to a non-functioning LLC. In other words, you can’t benefit from such.
So, do you have to renew your LLC? The answer is a resounding yes! LLCs need to be restored, and we’ve provided helpful information on how this is done.
You can conduct further research to know the renewal terms and leverage on opportunities presented.