Administrative dissolution is an action that the Minnesota Secretary of State takes when a Minnesota business does not take certain actions required by law. When a business is administratively dissolved, it ceases to exist in Minnesota. The most common scenario for an administrative dissolution is when a business does not file an annual renewal. As LLCs continue to grow as a popular and effective entity type, knowing how to avoid an administrative dissolution, or what happens when you get an administrative dissolution notice, is crucial.
Minnesota requires that every LLC file an annual renewal with the Secretary of State. There is no fee to file an annual renewal, the renewal can be done online through the Secretary of State’s website here. This renewal tells the state what entities are still active, if the registered address has changed, and if any other basic information included in the business’s articles of organization has changed.
Though filing the annual renewal can be easy, it can be easy to forget. If an annual renewal is not filed, the business will be dissolved. There is no warning for businesses that do not file their annual renewal and a notice is only sent to the registered address of the business once it has been dissolved. Once administratively dissolved the business ceases to exist in Minnesota but this does not mean that the business does not exist in any form.
A business that has been administratively dissolved will remain so until a renewal has been filled for the current year and a fee of $25 has been paid. This “reinstatement” is retroactive, meaning once the renewal is filed, it is as if the business was never dissolved. While it may sound easy to reinstate a business, significant issues can arise while a business is dissolved.
After being administratively dissolved, an entity is “inactive” according to the state. This means that any of the protections afforded by an LLC to its members no longer exist, and actions taken by members on behalf of the LLC may or may not be valid. The retroactive reinstatement can help limit the danger of these issues, but another potential issue is that an inactive LLC can lose its name if another LLC files articles of organization under the same name.
Ultimately, getting a letter of administrative dissolution is a problem that can easily and quickly be rectified, but that does not diminish the risks that are present while a business is inactive.
Jacob Grow