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Question: I moved out of the state where my company was formed as a corporate almost 2 years ago. Then, we had to downsize, lay off all employees and work from home office and a consultant. However, I never dissolved the company nor transferred it to the other state of residence. 1) Can I operate as a sole proprietorship in the other state without any "conflict" or ramifications from the government? 2) can I transfer the corporation to another state, even though it "technically" hasn't been in use for a year or so? 3) Or am I bound to still technically operate the corporation rather than the sole proprietorship?? 4) If I'm ready to "start all over" or move into an actual location in the new state, should I just transfer the Corporation or dissolve in one state first and then form a new one in this new state OR ??

Response: This is not a legal question but, rather, a plea for legal advice. Sorry but you need to retain a corporate / tax attorney to go through your situation with you to obtain thorough legal advice. What I do is answer a single short, concise legal question for selected users. Based on the above, I can, however, make a few comments.

The facts stated above are ambiguous but I assume they say that you are now operating a company in a state different than the state in which it was incorporate. I also assume you failed to make the required filings for the corporation with the secretary of state's office which undoubtedly means the corporation has been administratively dissolved. Below is information from the Missouri Secretary of State's office regarding the administrative dissolution of a corporation:
What is administrative dissolution?
When a corporation fails to timely file an annual report, fails to maintain a registered agent, its duration expires or in several other situations, the Secretary of State may administratively dissolve that corporation. The Secretary’s authority to do so is granted by statute, and upon dissolution, a corporation may no longer carry on its business other than to wind up, liquidate and pay off its creditors. A corporation may apply to have an administrative dissolution rescinded. Link.
What are the future consequences of having your corporation administratively dissolved and failing to properly dissolve it according to the corporate code of the state of incorporation?
Failure to [properly] dissolve a corporation or LLC could result in the following:
  • Tax Filings. The company may be required to prepare and submit tax returns to the IRS, the state, and other municipal taxing authorities.
  • Personal Liability. Individual shareholders or members may be PERSONALLY liable for the entity's debts and tax liability [that accrue after administrative dissolution].
  • Annual Reports. The entity may be required to prepare an annual report for the current year – even if NOT conducting business – along with tax payments & penalties.
  • No Distribution of Assets. Corporate/LLC assets may NOT be distributed to shareholders/members until the entity is properly dissolved.
  • Future Product Liability. An entity that is not properly dissolved may carry potential future liability from the products and services sold by the entity while it was operating. Mycorporaiton.com.

Operation as a sole proprietorship
I gather it is your wish to operate as a sole proprietorship in the new state. If your corporation had no assets at the time it went inactive, then this might be possible. Removal of assets from a corporation prior to dissolution carry tax and liability consequences. Please check with your tax accountant on the tax issues. If you have not yet done so, you also need to file a final tax return for the corporation showing that is no longer in operation. Again, please check with your tax accountant for the particulars.

If this business is strictly service oriented requiring little in the way of assets to function, then the issues are minimized. Still, the best course of action would be to properly dissolve your corporation in the state where it was organized. Contact the Secretary of State's office and they may be able to assist you with this process.


Submitted: 1-20-2007; Katrice, FL
Response: 1-25-2007; JJR

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