What will happen if a U.S. company does not cancel?_What will happen if a U.S. company does not have an annual review?

Failure to cancel U.S. companies may cause legal risks, financial burdens and credit stains, and even affect global business layout, so they need to be treated with caution.

Legal Risks and Compliance Issues

If a U.S. company does not cancel for a long time, the first thing it will face is the legal risk. According to state regulations, even if the company ceases operations, it still needs to submit annual reports on time and pay taxes. For example, California requires a minimum franchise tax of US$800 per year.Delaware imposes heavy fines on companies that fail to declare in time. Continuous overdue filing may result in the company being forced to dissolve by the state government, but the liability of the legal person will not be exempted.

What’s more serious is that legal persons who have not deregistered the company may be included in the list of dishonest persons. New York State and other regions will issue reports to the state.The court applied for "substitute services" for the missing legal person, and then started the breach of contract judgment process. There has been a case where a Chinese investor received a fine of US$27,000 five years later for failing to cancel a shell company in Colorado, and his U.S. visa application was also blocked.

Ongoing financial burden

Maintaining an unregistered company means ongoing costs. In addition to basic maintenance fees, professional registrationThe annual agency service fee is about US$100-500, and the fee for an accountant to handle zero declarations usually starts at US$200 each time. If the company has opened a bank account, most institutions will charge account management fees, and banks such as JPMorgan Chase charge a monthly fee of US$15-40 for dormant accounts.

Cross-border companies also need to pay attention to the risk of double taxation. Although the China-U.S. tax treaty can deduct some taxes, companies that have not been canceled still need to declare global income. IRS data in 2018 shows that 30% of companies that have been forcibly canceled have tax arrears, with an average tax arrears of US$12,000. Some states will also trace back the top threeAnnual taxes, for example, Texas imposes a 10% late fee on companies that fail to file returns.

The impact on the corporate credit system

Dun&Commercial credit agencies such as Bradstreet will continue to track the status of the company. For companies that have not been canceled but have ceased operations, their credit scores will decrease by 3-5 points every month. When the score is lower than 40, they will enter the list of "high-risk companies", which will directly affect the financing interest rates of affiliated companies. A Shenzhen electronics company was addedThe state subsidiary was not deregistered, resulting in the parent company being required to pay 70% of the payment in advance when purchasing goods in the United States.

Credit stains may have a chain reaction. The Experian business database records will be retained for 7 years, during which the business owner may be forced to pay the old company's arrears when registering a new company in the United States. In 2019, FlorThe judgment of the Rida State Court shows that 32% of the cases of rejection of new company registration are related to the failure of affiliated companies to cancel.

For companies planning to go public, the SEC will trace all affiliated companies of the controlling shareholder during its review. There are three cases of postponement of Chinese concept stock IPOs in 2021, all because the founders failed to promptly cancel the U.S. shell companies many years ago. Some states, such as Wyoming, also allow creditors to pursue personal liability of shareholders through the company that has not been cancelled, which constitutes a substantial improvement in asset protection.Threat.

Summary

The failure of US companies to cancel is by no means a simple matter of "letting go", but involves the law.Financial, credit and other multi-dimensional systemic risks. From state fines to global business restrictions, from personal credit damage to cross-border tax audits, each link may cause far greater losses than expected. Especially in the context of tightened supervision in China and the United States, underegistered companies may become the most vulnerable link in the compliance chain.

ProfessionalThe matter should be left to a professional agency. Lexun Finance and Taxation Consulting has ten years of experience in canceling U.S. companies and is familiar with the differences in cancellation procedures in various states. It can assist in handling tax settlements, claims announcements, government filings and other full-process matters, helping business owners exit the U.S. market in compliance with regulations and avoid subsequent legal risks. Cancellation is not only the end, but also a better start.