Reviving an LLC for an SBA Loan: Navigating State Requirements and Costs
Planning to apply for an SBA (Small Business Administration) loan and encountered an issue with a previously revoked LLC that was never dissolved? This article aims to guide you through the process of whether to reinstate your entity or simply form a new one. We will also examine the associated legal and financial ramifications.
Do You Require a Loan?
When the primary objective is securing a loan and you're considering an SBA loan, the initial question should be whether you need a loan in the first place. This foundational step is known as the 'should I apply' part. If you do indeed need a loan, it is not a strict requirement to reinstate the LLC before applying. However, collaborating with reputable brokers or lenders who understand the nuances can streamline the process significantly.
These professionals can assist in validating your business's eligibility for an SBA loan based on financials, tax returns, and creditworthiness. If your business meets these criteria, there is still time to work on reestablishing the legal entity after qualification.
The Process of Reinstating an LLC
For those who decide to reinstate their LLC, understanding the state requirements and potential costs is crucial. When applying for an SBA loan, the certifying officer will review the date of formation and require a certificate of good standing from the Secretary of State. This document will also indicate the reinstatement date.
However, there are scenarios where reinstatement may not be feasible, such as when the business was not conducting any operations on the date on which the loan application was submitted. In such cases, having a mismatch between the reinstatement date and the date of formation can raise red flags regarding the legitimacy of your business.
Financial and Legal Considerations
Reinstating a revoked LLC can be an expensive endeavor, often burdened by back taxes, filing fees, penalties, and interest. Historically, these costs can be particularly egregious. Therefore, consider the necessity of reinstatement. If there are critical contracts that cannot be transferred, then reinvestigation may be warranted. Otherwise, forming a new LLC without reinstating the old one might be a smarter financial and legal move.
It’s also important to note that the paperwork involved with a business loan can become complicated when dealing with a previously dormant LLC. Connecting historical activity with the new legal entity requires meticulous record-keeping and may require legal assistance to ensure all documentation is in order.
Professional Advice and Disclaimer
The decision to reinstate your LLC, particularly a revoked one, should be informed by professional advice. The provided information is not a substitute for legal counsel. Engaging a licensed attorney is advisable to navigate these legal complexities and avoid adverse outcomes. The lack of proper legal advice can put your business's rights at risk.
Additionally, if you believe you have a claim against someone, prompt legal consultation is crucial to avoid missing the statute of limitations.