Delaware 20 Business Entity Status Definition

Delaware's 20 Business Entity Statuses You Need to Know

1. Good Standing

The entity's existence has not been terminated either voluntarily or administratively. This status generally indicates a lower risk for lenders, as it suggests the business is compliant with state requirements and likely operationally stable.

2. Cancelled

A certificate of Cancellation has been voluntarily filed by the entity to terminate its existence. This certificate is filed when an entity has dissolved and at the completion of winding up the entity. Lenders should be extremely cautious with cancelled entities, as they have ceased operations and are unlikely to have ongoing revenue or assets.

3. Dissolved

A certificate of Dissolution has been voluntarily filed by the corporation to terminate its legal existence. Similar to cancelled status, dissolved entities pose significant risks for lenders as they are no longer operating and may have limited assets or ability to repay loans.

4. Expired

A Limited Liability Partnership or Limited Liability Limited Partnership has not filed their annual report in a timely manner. A reinstatement and all Annual Reports that have not been filed, may be filed to reinstate the LLP or LLLP to good standing status. Refer to Title 6, Chapter 15 Section 1003. Expired status indicates potential compliance issues and operational instability, which may increase lending risk, though the possibility of reinstatement suggests the business could return to good standing.

5. Forfeited

A corporation has on record a Certificate of Resignation of registered agent and the appointment of a new registered agent was not filed within the designated period of 30 days. This status suggests administrative negligence and potential communication difficulties, which could be red flags for lenders assessing the business's management capabilities and stability.

6. Resign to Appointment

An Unincorporated Non-Profit Association filed pursuant to Title 6, Chapter 19 may appoint an agent to receive service of process. If such agent resigns from this appointment the entity would show this status. While specific to non-profits, this status indicates a gap in the entity's legal representation, which could impact its ability to receive important communications and may suggest administrative challenges.

7. Cancelled-Voided

A Limited Partnership, Limited Liability Company or Partnership failed to pay their annual tax for a period of 3 years from the date it is due. This status indicates severe tax delinquency and likely financial distress, presenting a high risk for lenders and suggesting potential operational cessation.

8. Consolidated

A Certificate of Merger and Consolidation has been filed. The existence of this entity has terminated and a new entity has been created as a result of the filing. Lenders should be aware that the original entity no longer exists, and any lending decisions should be based on the newly created entity's status and financials.

9. Merged

A Certificate of Merger between 1 or more entities has been filed. This entity did not survive the merger but was merged into another entity. Similar to consolidated status, lenders should focus on the surviving entity's status and financial health when making lending decisions.

10. Converted

A Certificate of Conversion has been filed. This entity has been converted to an entity that is in existence in another jurisdiction. Lenders should investigate the entity's new jurisdiction and status, as this change could impact regulatory compliance and financial reporting requirements.

11. AR filed, Tax delinquent

This represents a corporation that has filed the required annual report, however there are still delinquent taxes due. While the entity shows some level of compliance by filing reports, the tax delinquency suggests financial difficulties that could impact loan repayment ability.

12. Revoked

A Limited Liability Partnership (LLP) that has not filed their Annual Report. The Statement of Qualification or Statement of Foreign Qualification of the LLP has been revoked by the Secretary of State. Revoked status indicates severe compliance issues and potential operational instability, presenting significant risks for lenders.

13. AR delinquent, Tax paid

This represents a corporation that has paid taxes in full, however the required annual report has not been filed. While tax payment is positive, the failure to file annual reports may indicate administrative issues or potential operational changes that lenders should investigate further.

14. Forfeited-Resigned

A Limited Partnership, Limited Liability Company or Partnership that has on record a Certificate of Resignation of registered agent and the appointment of a new registered agent was not filed within the designated period of 30 days. This status suggests administrative negligence and potential communication difficulties, which could be red flags for lenders assessing the business's management capabilities and stability.

15. Surrendered

A Certificate of Voluntary Dissolution before issuance of shares or before beginning of business has been filed with the Division of Corporations. This status indicates the entity never became fully operational, presenting significant risks for lenders as there may be no assets or revenue stream to support loan repayment.

16. Transfer

A Certificate of Transfer has been filed and the result of such transfer is the cessation of its existence as an entity of the State of Delaware. Lenders should be aware that the entity no longer exists in Delaware and should investigate its new status and jurisdiction before making lending decisions.

17. AR delinquent, Tax due

This represents a corporation that has not filed the required annual report and there are delinquent taxes due. This status indicates significant compliance issues and potential financial distress, presenting high risks for lenders.

18. Void

A corporation that failed to pay it's annual franchise tax for a period of 1 year or a Foreign Corporation that has not filed their annual reports within a 2 year period. Void status suggests severe compliance issues and potential cessation of operations, presenting significant risks for lenders.

19. Withdrawal

A voluntary Certificate of Withdrawal has been filed by the Corporation which is registered/qualified to do business in Delaware as a Foreign Corporation but domestic in another jurisdiction, to terminate it's authority to transact business in the State of Delaware. Lenders should investigate the entity's status in its domestic jurisdiction, as withdrawal from Delaware may indicate a change in operations or market focus.

20. Ceased Good Standing

This represents an entity that failed to pay their annual taxes timely. For example: 2002 taxes due June 1, 2003 were not received by end of day June 1, 2003. While less severe than some other statuses, this indicates potential financial difficulties or administrative issues that could impact the entity's stability and ability to repay loans.

Implications for Alternative Lenders

Understanding these statuses is crucial for:

1. Risk Assessment: Each status provides insights into the business's stability and compliance.
2. Due Diligence: Knowing what each status means allows for more targeted questions and investigations.
3. Portfolio Management: Regularly checking the status of businesses in your portfolio can help you proactively manage risk.
4. Competitive Advantage: This knowledge allows you to make quicker, more informed decisions than less-informed competitors.

By mastering Delaware's business statuses, you're equipping yourself with a powerful tool for risk assessment and decision-making. Remember, while these statuses provide valuable insights, they should be considered alongside other factors in your lending criteria.

Disclaimer: This guide is for informational purposes only and should not be considered legal advice. Always consult with legal professionals for specific situations.