Can a Suspended Corporation or LLC Sue or Defend a Lawsuit in California?

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

Not while it stays suspended. A California corporation or LLC that the Franchise Tax Board or the Secretary of State has suspended loses its powers, rights, and privileges, and courts treat that as a loss of capacity to prosecute or defend a lawsuit. (Rev. & Tax. Code, § 23301; Corp. Code, § 2205, subd. (c).) The defect can be cured. Once the entity is reinstated, the case usually picks up where it stopped. Kolmogorov Law, P.C. handles suspended-entity issues for businesses in Orange County, Los Angeles, and statewide.

Call (909) 235-6116 or contact us online to discuss a lawsuit that involves a suspended corporation or LLC, on either side.

What suspended means and who does it

Two agencies can suspend a California entity, and they do it for different reasons.

The Franchise Tax Board acts on tax problems. A domestic company's powers, rights, and privileges may be suspended when tax, penalty, or interest goes unpaid past the statutory deadline. (Rev. & Tax. Code, § 23301.) The same result can follow a required return that was never filed. (Rev. & Tax. Code, § 23301.5.) Both rules reach limited liability companies, because the statute defines "taxpayer" to include them. (Rev. & Tax. Code, § 23305.5, subd. (a).)

The Secretary of State acts on paperwork. A corporation that has filed no statement of information for 24 months, and has been certified for a penalty, receives a notice. If no statement arrives within 60 days, its corporate powers are suspended. (Corp. Code, § 2205, subds. (a)-(c).) LLCs are subject to a matching rule. (Corp. Code, § 17713.10.)

The Secretary of State's online business search displays the status. I check it for every party the day a new matter comes in.

Can a suspended corporation or LLC sue or defend?

No, not until it is revived. California courts have long held that a suspended corporation may not prosecute or defend an action in a California court, and may not appeal from an adverse judgment. (Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1365-1366.)

One limit matters to both sides. Suspension is a legal disability, a matter of capacity. It does not strip the court of jurisdiction, and a defendant that never properly raises the objection waives it. (Center for Self-Improvement & Community Development v. Lennar Corp. (2009) 173 Cal.App.4th 1543, 1552-1553.)

If the company suing you is suspended

Raise it early. Lack of legal capacity to sue is a listed ground for objecting to a complaint, by demurrer or in the answer. (Code Civ. Proc., § 430.10, subd. (b).)

Do not expect the case to vanish. When a suspension surfaces during litigation, the normal practice is for the trial court to allow a short continuance so the company can pay its back taxes and reinstate. (Timberline, supra, 54 Cal.App.4th at p. 1366.)

So what does the objection buy? Time, because the plaintiff must stop and deal with the tax agency. Bargaining strength, since back taxes, penalties, and interest are usually paid or secured before revivor. And sometimes the case itself, when the plaintiff cannot cure or the limitations period expires first.

Revivor and the statute of limitations trap

A suspended company gets relief by applying to the Franchise Tax Board, filing every missing return, and paying the tax, penalties, and interest owed, or posting security the Board accepts. The Board then issues a certificate of revivor. (Rev. & Tax. Code, §§ 23305, 23305.2.) A Secretary of State suspension is ordinarily cleared by filing the overdue statement. (Corp. Code, §§ 2205, subd. (d), 17713.10, subd. (d).) Reinstatement by revivor is "without prejudice to any action, defense, or right which has accrued by reason of the original suspension." (Rev. & Tax. Code, § 23305a.)

Courts read that language as a line between procedure and substance. Revival validates what the company did in the litigation while suspended, including motions, discovery, and even an appeal. (Center for Self-Improvement, supra, 173 Cal.App.4th at p. 1553.) It does not rescue a claim whose deadline passed in the meantime. The statute of limitations is treated as a substantive defense, so a suit filed during suspension is time-barred if the period runs before revival. (Id. at p. 1554.)

This is why I look at the calendar before the motion. The objection has to be preserved by demurrer or in the answer, but how hard to press it, and when, depends on the dates. See our statutes of limitations guide.

If your own corporation or LLC is suspended

Fix the status first. Everything else waits on it.

A suspended company that has been served cannot properly defend until it is revived. The response deadline does not pause by itself while you deal with the Franchise Tax Board, and a missed deadline can end in a default judgment. Our guide to the first 30 days after being sued covers the triage. We do not give tax advice; your accountant handles the revivor filing while we protect the court deadlines.

Contracts are the second exposure. A contract made in California while the company was under a Franchise Tax Board suspension is voidable at the request of any other party to it. (Rev. & Tax. Code, § 23304.1, subd. (a).) That right can be exercised only in a lawsuit, and the court must give the company a reasonable opportunity to cure before entering judgment. (Rev. & Tax. Code, § 23304.5.) The cure is a separate application for relief from voidability, which carries a penalty of $100 per day up to a statutory cap. (Rev. & Tax. Code, § 23305.1, subds. (a), (b).)

Long suspensions get worse with age. A domestic corporation held in suspension by the Franchise Tax Board for at least 60 continuous months may be administratively dissolved, and that dissolution does not discharge its liability to creditors. (Corp. Code, § 2205.5, subds. (a), (i).) Dissolved entities follow different rules, covered on our page about suing a dissolved corporation or LLC.

Out-of-state companies that never registered

A related problem looks the same from the defense table. A foreign corporation that transacts intrastate business without qualifying cannot maintain an action on that business until it qualifies and pays a $250 penalty plus filing fees. It must also file receipts with the court showing those payments and the taxes owed for the period. (Corp. Code, § 2203, subd. (c).) A foreign LLC transacting intrastate business cannot maintain an action here without a certificate of registration, although it may still defend one. (Corp. Code, § 17708.07, subds. (a), (b).)

What to bring to the first meeting

Bring the summons and complaint, with the date and manner of service. Print the Secretary of State record for each entity and note the date you pulled it. Add any Franchise Tax Board notices or demands, the contract at issue, and a short timeline of the dispute so we can test the limitations period.

Frequently asked questions

The LLC suing my company shows as FTB suspended on the Secretary of State website. Can it still sue us?

Not while the suspension lasts. A California LLC suspended under Revenue and Taxation Code section 23301 lacks capacity to prosecute a lawsuit, and you can object in your answer or by demurrer. Expect the judge to give the LLC time to revive. If it obtains a certificate of revivor, the case continues, unless the limitations period expired while the LLC was still suspended.

Can a suspended corporation sue in California?

A suspended corporation cannot prosecute or defend an action in a California court until its powers are restored. The disability is one of capacity, so the opposing party has to raise it or it is waived. Judges usually allow a short continuance for the corporation to clear the suspension.

My corporation was suspended for unpaid franchise tax and we were just served with a lawsuit. What should we do first?

Start the revivor process immediately and get counsel involved, because the deadline to respond does not pause. Under California law a suspended corporation cannot defend an action, so a missed response deadline is the practical risk. Revivor ordinarily requires filing all missing returns and paying, or securing, the tax, penalties, and interest. After the certificate issues, the company can defend.

Does revivor fix a statute of limitations problem?

No. In California, revivor is without prejudice to defenses that accrued because of the suspension, and courts treat the statute of limitations as one of them. A complaint filed during suspension is saved only if revivor happens before the limitations period ends. If the period runs first, the claim is time-barred even though the company later cleared its tax delinquency.

Are contracts signed by a suspended company valid in California?

They are voidable, not void. Under Revenue and Taxation Code section 23304.1, a contract made in California during a Franchise Tax Board suspension can be set aside at the request of another party to it, but only through a lawsuit. The court must allow the company a reasonable opportunity to cure by obtaining relief from voidability before it orders rescission.

Talk to a California business litigation attorney

If a suspended corporation or LLC is on either side of your dispute, call (909) 235-6116 or contact us online. I handle the matter myself from the first call through trial. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the entity's status, the dates, and the court.