From individual tax payments due the Internal Revenue Service to a bevy of taxes levied on corporate entities, there is one thing all taxpayers can be sure of. Failure to pay taxes can eventually result in trouble for a person or company. Tax delinquency may cause collection activity, loss of business licenses and garnishments of payment checks.
For one Texas corporation, failure to pay the state’s mandated franchise tax has resulted in the loss of its state corporate charter. Although the business, Texas Coastal Energy Co. LLC, can continue to operate in the state, it cannot act as a corporation. That means it has no ability to file a lawsuit. Equally damaging, the company cannot defend itself as a corporate entity in a court.
The loss of the charter also means that the directors of the corporation become liable for the debts of the company. Effectively, the principles lose the financial and legal protection that the corporate status affords them.
According to the Texas Comptroller’s Office, the company can correct the issue by complying with franchise tax requirements by Nov. 17. Because the damages of losing the corporate charter could be quite devastating, even if the company continues doing business, correcting the issue in a timely manner is likely a good idea.
Companies and individuals facing delinquent tax situations may not understand how to deal with consequences in the most positive manner. Understanding legal obligations and options is a first step to righting delinquencies. In some cases, tax agencies will work to negotiate settlements, and in other cases, the tax bill may be wrong and can be disputed.
Source: Merced Sun-Star, “Congressman’s corp. loses Texas charter over taxes” Oct. 21, 2014