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Forefeited LLCs - Able to Be Sued But Not Able to Sue

September 21, 2010

By: A. Lee Lundy, Jr.

Take a look on the Maryland State Department of Assessments and Taxation Website and you’ll notice there are a lot of limited liability companies whose right to do business and name have been forfeited for failing to file personal property tax returns.  It happens.  The returns are among the last things that many LLC members think about.

So, you’ve got a forfeited LLC.  Under Maryland law, your entity does not legally exist.  That is, until you get sued.  Many LLC members do not realize that they can be forced to defend a lawsuit against the LLC even after forfeiture.  But what if you want to sue someone else?  The Court of Special Appeals of Maryland in Price v. Upper Chesapeake Health Ventures recently upheld a dismissal of a case on the basis that the LLC plaintiff was forfeited and had no legal standing to bring suit.  Seems like a double standard, right?  Maybe, but that’s the way it is.

Moral of the story?  If you want your LLC to bring suit against someone, make sure that the LLC is in good standing before suit is filed.  File your back personal property tax returns, submit articles of revival, and then bring suit.  Or better yet, make sure you set a yearly reminder to file your personal property tax returns.  You never know when you will want your LLC to be a legally recognized entity.

If you have any questions, please contact Lee Lundy at 410-752-9705 or llundy@tydingslaw.com.

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