How long has it been since you reviewed your corporate documents? Are you using the proper corporate name or have you inadvertently confused an LLC with Inc.? As discussed below, it really does matter.
A construction company recently found out the hard way that its corporate name really does matter, especially when contracting with the federal government. The construction company was awarded a bid on part of the army construction contract. The second lowest bidder protested the award, asserting that the lowest bidder was not qualified to bid on the project. At first blush, this appeared to be just a disgruntled, losing bidder.
The Comptroller General investigated the situation and made a few discoveries about the company that won the bid:
- The company converted from a corporation to a limited liability company a year before submitting the bid;
- The company allowed its previous corporation to be dissolved;
- The company submitted its bid under the old corporate name; and
- The new company was not registered to bid on government project;
Because the corporate entity that submitted the bid was no longer in existence and because the new corporate entity, the LLC, was not registered with the government, the new company was not eligible to bid on government projects. So, the Comptroller General reversed the award of the contract.
Of greater concern is whether confusion about the construction company’s corporate status exists in other areas. I wonder whether other contracts are being executed in the name of the new or the old company. I also wonder which entity will be sued if problems arise with a project. And, I wonder which entity is insured, if either. I could certainly see an insurance company claiming it insured the old company, not the new one.
Maintaining your corporate existence may be low on your list of priorities, but the impact can be significant. We recommend that you regularly review your corporate documents to avoid some of the headaches mentioned above.
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