Inactive status

Maybe I never noticed during the busy years of the real estate bubble, but I am aware now that some states let you put your license in an “inactive” status. What does this mean and why would you want to do this?

Inactive status means that you have notified the state banking department that you are not actively conducting business in their state but you do not wish to relinquish your license. For those states that have an inactive status for licensees, notification may mean sending a letter or completing and submitting a specific form. Arizona, Florida, Montana, New Jersey, New York, Oklahoma, Texas, and Washington are some of the states that have a formal inactive status.

However, other states do not have such a category and if you do not wish to maintain the license and all of its requirements, you must surrender the license.

For states that allow you to go inactive, it is an excellent way to temporarily suspend your expenses in that state and wait until the market comes back. It permits you to postpone making a decision about your current business plan until the subprime mess shakes itself out and you can jump back into the newest trends. You will not need to go through the time and expense of getting a license when you wish to go back into that state. You only have to re-file for active license status.

What if your state does not have a category called inactive licensee? Then you must make a cost-benefit analysis of keeping your license. Is the reason that you obtained the license still valid but market conditions are not permitting you to earn enough in fees to justify the expense of surety bonds, accountants’ fees, renewal fees, and registered agent fees? Then, bolster your marketing dollars so that the license does become profitable. If you feel that you misjudged the market in a particular state, then surrender the license and cut your losses. Not every business proposition is a winner. Know when to hold ‘em and know when to fold ‘em.