Dissolving a business means that you are formally and officially closing your company. But there is more to dissolving a business than just turning the lights off and locking the door. Liabilities and assets must be handled properly, in the same way that someone would settle the debts, affairs, and assets of someone who has passed away. As a dissolution lawyer residents rely on from Eric Lindh Foster Law, LLC can attest, business owners can benefit from having a legal team guide them through the process of dissolving their company, so that it can be closed with minimal issues to deal with. If there are mistakes during the dissolution process, it can cause more frustration and hardship than is needed.
Submitting Dissolution Paperwork
The initial step in dissolving a business is for the board of directors or owner to create a dissolve resolution. After this is agreed upon by every shareholder, the company has to file dissolution articles to the secretary state’s office. Keep in mind that this must be done in the same state that the business was incorporated. The dissolution paperwork provides a legal notice that the company is closing and will no longer be in operation. Depending on the location, there may be other forms aside from the dissolution paperwork that has to be completed entirely and submitted.
Company Assets Liquidation
Property owned by the business must be liquidated as part of the dissolution, which means selling assets that are not utilized as loan collateral. Property used for loan security must either be paid off by the business before sold for cash, or go to the agency that loaned the money against it. Whether you can liquidate assets depends on if your business was insolvent at the moment of dissolution and how much cash you have on hand.
Another step in business dissolution is to handle all outstanding liabilities. These are obligations that your company had incurred prior to closing, including services and goods that may have been paid for but have yet to be delivered, along with long-term or short-term debts. It is critical that you file the final state and federal payroll and corporate forms for income tax. After these liabilities have been settled, remaining value in the business is transferred to shareholders or individual owners.
Notifying Interested Parties
After you have filed articles of dissolution, liquidated assets, and resolved debts or other obligations, a final notice is sent to anyone that may have interest in your business. This notice would be sent to shareholders, owners, creditors, employees, customers, and other interested parties. The laws for who is notified and how much notice is given is set forth by the state. However, there is a common requirement to notify the Internal Revenue Service that a business is in the process of dissolution and will not be filing more tax returns in the future.