FTB Suspension: How to Reinstate Your Business

In California, the FTB may suspend your business if you don't pay or file your taxes. If suspended, your business cannot operate, but it also can't take any other actions, including selling assets, dissolving the company, entering into contracts, or defending itself in court (or bringing lawsuits against other parties). Suspension puts you into a state of limbo where you cannot operate, but you also can't really liquidate your assets and shut down either. 

You have to work out a solution with the FTB to get back on track. Additionally, the Secretary of State (SOS) can suspend businesses for not paying franchise fees or the annual tax. But in both cases, there are ways to get back into compliance. 

Key takeaways

• The FTB may suspend businesses for not paying or filing franchise taxes, corporate taxes, sales tax, or other business taxes. 
• If suspended, your business cannot sell products or services – it also cannot sell assets, take out loans, engage in litigation, or enter into contracts.
• To get back in business, you must pay or file all tax returns, taxes, penalties, fees, and interest, and file a Certificate of Revivor. 
• You can file the revivor certificate online, through the mail, or in person. 
• Reinstatement takes anywhere from a few days to a couple of months. Use TaxCure to find a licensed tax pro to guide you through the situation as quickly as possible. 

What happens if the FTB suspends your California business?

If your business is suspended, you cannot legally operate in California, and you're also banned from:

• Selling, transferring, or exchanging property
• Filing with automatic extensions
• Getting refunds
• Starting or continuing protests with the FTB
• Closing or dissolving your business legally
• Defending your business in court or bringing an action against another entity on behalf of your business
• Entering into contracts

You also lose the right to use your business name, and if another entity claims your name, you'll have to choose a new one when you get reinstated. Bottom line — FTB suspension puts your business in limbo. You cannot operate, but you also cannot officially close down, as you can't liquidate assets or dissolve the business. 

Additional consequences of unpaid FTB taxes

In addition to suspension, your business may face a $2000 penalty per tax year for not filing missing tax returns. You have 60 days to file after you receive a written demand. You may also be personally liable for the taxes if you did any of the following:

• Took assets out of the business
• Have unpaid loans to shareholders
• Paid excessive salaries to officers 

If you don't pay state taxes, the FTB may also file tax liens and use orders to withhold (OTW) to seize the business's bank accounts, rents, commissions, royalties, accounts receivable, or other assets. If the taxes are assessed against you personally, the FTB may levy (seize) your personal investments, wages, and assets. 

Entering into contracts during a business suspension

You cannot enter into contracts while your business is suspended by the FTB, and if you do, the contract will be unenforceable and voidable for the other party. That puts your business at significant risk, but the FTB offers relief from contract voidability (RCV). 

To get RCV, contact the FTB, choose a relief period, and pay $100 per day. If you secure relief, the other party can't void the contract, even though your business is suspended. However, you cannot spend more on relief than you owe in taxes. If a return isn't due, you'll owe the minimum franchise tax of $800 – in that case, you can only buy RCV for eight or fewer days. 

General partnerships, limited partnerships, and limited liability partnerships cannot use RCV. If you're only suspended by the Secretary of State, you're not subject to contract voidability. 

File FTB 2518BC (Application of Relief from Contract Voidability) to request RCV.

How to get your business back in good standing

To get your business back in business, you must get into compliance with the FTB and file a Certificate of Revivor Application. To get into compliance:

• File all past due returns
• Pay all past due taxes or make payment arrangements. 

You can file the revivor online, through the mail, or in person. 

• Online: to apply online, log into your MyFTB account or set up a new account if you don't have one. Then, view account summary, file past due returns, make payments, and finally, submit your revival application. Get started on the FTB website now.
• Through the mail: Corporations should file FTB 3557 BC (Application for Certificate of Revivor – Corporation), LLCs should file FTB3557 (Application for Certificate of Revivor – Limited Liability Company). The FTB doesn't have a copy of the LLC form online; if you provide your email address in their form request tool, they'll send it to you. 
• In person: You can apply in-person at an FTB office for expedited assistance, but only if the business is dealing with litigation, escrow, pending loans, or pending federal grants. You must come before 2 PM (1 PM at the Los Angeles FTB offices) to start the process. You only qualify for expedited in-person services if the business is facing these issues – you can't expedite for personal litigation or loans. 

The application of revivor is very short — you simply note the business name and address. Then, you sign to declare that you've submitted all returns, payments, or documents. 

What should you do if your business is suspended?

Often, businesses know that they're facing a suspension, but in other cases, a suspension can catch them completely off guard. Once you realize that you're suspended, consider the following:

• Make sure you don't operate – operating while suspended can expose you to more penalties or additional consequences such as permanent business closure. It's not worth the risk.
• Find out why you've been suspended – generally, it's due to not paying or filing taxes. Sign in to your FTB account to see if you have unfiled or unpaid taxes. If you're not sure, reach out to the FTB or contact a California tax professional.
• File delinquent returns – if you have unfiled returns, get them in. Consider working with a tax professional if you're not sure how to get started. A professional can ensure the returns are filed correctly, reconstruct business records if needed, and help you optimize your tax situation.
• Pay tax, penalties, fees, and interest – ideally, you pay everything in full to get reinstated, but if you're unable to pay in full, you may be able to make payment arrangements with the FTB. Unfortunately, your options may be more limited now that you're in suspension, but a California tax pro can help you. 

How to avoid a business suspension

To keep your business in good standing with the FTB and the SOS, file all returns and reports on time and pay taxes and fees in full and on time. If you cannot afford to pay taxes in full, proactively reach out to the FTB and ask for payment arrangements. 

The FTB approves payment arrangements on business taxes on a case-by-case basis, but you may be able to set up:

• FTB installment agreements – make monthly payments on taxes
• FTB offers in compromise – prove you can't pay in full, and the FTB may let you settle for less than owed

Generally, you'll need to address the suspension before you make payment arrangements. In all cases, it's easier to set up payments or apply for a settlement before your business is suspended. Whenever possible, file your business tax returns and reach out to the FTB to proactively make arrangements on taxes you can't afford to pay – that's much easier than trying to make payment arrangements after a suspension.

The suspension letter should detail exactly what you need to do to get back into good standing. 

FAQs on FTB business suspensions

What happens when the FTB suspends your business?

The FTB will send you a letter (typically through certified mail). The letter will explain the suspension, outline how that affects your business (eg, you won't be able to operate, sell assets, or enter into contracts), and explain what you need to do to get back on track. 

What taxes can cause a CA business license suspension?

Failure to pay FTB taxes or fees, such as franchise tax or income tax, can lead to a business suspension. The FTB may also suspend your business if you don't pay payroll taxes to the Employment Development Department or taxes to the California Department of Tax and Fee Administration (CDTFA), including sales and use Tax, fuel taxes, or cigarette, tobacco, and alcohol taxes.

How do I reinstate a suspended California business license?

To reinstate your suspended business license, address the reason for the suspension – for example, file unfiled returns or make payments to the FTB, CDTFA, or EDD. Then, file a Certificate of Revivor for your entity type online, through the mail, or in person. 

Can I operate while my business license is suspended?

No, operating while suspended is illegal and may expose you to penalties, legal action, or permanent closure of your business. You cannot sell products or services, but you also cannot take many actions on behalf of the business, including selling or transferring assets, dissolving your entity with the Secretary of State, going through legal proceedings, or entering into contracts. 

How long does license reinstatement take in California?

The exact timeline varies. FTB reinstatement typically takes one to two months, but if you qualify for expedited reinstatement in person at an FTB office, the process may be faster. If you were also suspended by the Secretary of State, you'll need to request reinstatement from that agency as well, which typically only takes about five days but can be done even faster if you request expedited approval. You must be in good standing with both entities to start operating again.

Can the CDTFA suspend my business? 

The CDTFA cannot completely suspend your business and prevent it from operating, but if you don't pay your sales tax, the CDTFA can revoke your sales tax certificate, making it illegal for you to make sales. Additionally, if you don't pay or file returns, the CDTFA can let the FTB know you're delinquent, and then, the FTB may suspend your business, meaning you basically cannot do anything, including selling assets or taking out loans. 

Can the EDD suspend my business?

The EDD can suspend your payroll account, making it illegal for you to have employees in California. If that happens, the FTB will typically suspend your business as well, so you can no longer operate legally in the state. 

Can the FTB take away my professional licenses for unpaid taxes?

Not directly, but the FTB can notify your licensing body about the unpaid taxes,s so they refuse to issue or renew your professional license. You will lose your professional license if you're on the FTB or CDTFA's list of top 500 tax delinquencies over $100,000. You'll receive a preliminary notice of suspension, which gives you 90 days to pay in full or set up payments. If you don't take action during the 90 days, the state will suspend your professional license until you get a release from the FTB or CDTFA.

Get help with business suspension.ns

Dealing with a suspension is incredibly stressful – you lose revenue every day you can't operate, but in most cases, the bills are still there. The longer you're banned from operating, the deeper in the hole you'll get, and the harder it can be to dig yourself out. 

To get relief, you need to tackle this problem head-on, and a licensed California tax professional can help you. Use TaxCure to search for a licensed pro.

Check out this page on FTB tax professionals – or start your search on this page. Use the filters to narrow down the search results so you only see pros who have experience working with the FTB. Then, check out reviews and reach out to a professional to see if they're the right fit. They'll help you get back on track with the state so you can get back to business as usual.