How To Close a Corporation Without Legal Issues
Do you need to close and dissolve a corporation? Then let’s go over everything you need to know to get started and prevent the common mistakes entrepreneurs make when dissolving a corporation.
When starting a corporation, filing the articles of incorporation is required. Conversely, to dissolve a corporation, we must file the certificate of dissolution. Both are legal documents that the secretary of state advises you to review through an attorney since they cannot provide the legal advice you may need to avoid complications throughout the process. Many entrepreneurs erroneously dissolve a corporation by ceasing all business actions without formal dissolution, but this bears the risk of potential lawsuits and liabilities.
While your corporation exists, the state demands that you meet all legal obligations for complete dissolution. While in good standing, corporations may have perpetual existence until formally dissolved. If inactive while in good standing with the state, the corporation may garner fees or be administratively dissolved by the government, inheriting respective debts and penalties. Business attorneys can efficiently guide you through each step of dissolving your corporation and help you avoid legal issues and delays.
Typically, the bylaws of your corporation describe the process of dissolution. If you incorporate a new entity with us, our incorporation service includes your corporate bylaws along with your articles of incorporation and many other legal documents affordably prepared and completed specifically for your business. Financial, tax, and business matters require closure before the process of corporate dissolution is complete. It’s never part of the business plan to ultimately dissolve a corporation. Unfortunately, some events, difficulties, and failures can be impossible to forecast and may force you to file the certificate of dissolution. You may have to continue paying corporate taxes or file annual reports if you fail to dissolve your corporation.
Many factors influence the time and difficulty of dissolving a corporation, such as the entity size, debts, assets, tax situation, the industry, and state requirements. Where needed, we’ll bring all required corporate and legal documents to completion and ensure all of your bases are covered. Based on each state’s requirements, Spiegel & Utrera, P.A. will prepare any necessary records such as the notice and minutes for your annual meetings.
Call us for a free consultation with our business law attorneys at (800) 603-3900.
Dissolve a Corporation
There’s a roadmap for dissolving a corporation, including fulfillment of several financial, business, and legal matters. Corporate dissolution requirements vary per state though may generally require the following actions:
Get Directors and Shareholders to Vote for Corporate Dissolution
One of the major steps in dissolving your corporation is to record the minutes of a board meeting with your corporate directors and vote on dissolution. Some states require that the majority of directors and shareholders vote for dissolving the corporation, though the exact number needed varies per state.
With most state governments, if two-thirds of directors and shareholders don’t vote for dissolving the corporation, you may not be able to complete the certificate of dissolution process. At this stage, you should have a plan for distributing assets and satisfying financial obligations with your shareholders. Corporate bylaws dictate the adopted procedure of dissolving a corporation—making it important to have a business lawyer complete the bylaws along with your articles when incorporating.
Notify the IRS and Get Tax Clearance to Dissolve Your Corporation
States also need you to obtain tax clearance from the IRS before filing the certificate of dissolution. The IRS may demand a corporation to file a final annual tax return for the year of dissolution, along with any other required tax forms. If you have pending taxes and dissolve your corporation without transferring assets, the IRS could seize those assets to pay off the rest of your tax debt.
Close Corporate Accounts and Cancel Business Licenses
Dissolving a corporation includes closing all bank accounts, ending contracts, collecting final payments, meeting commitments with employees, withdrawing leases, notifying vendors, and possibly terminating any permits or licenses in the state attributed to your business. It may be necessary to notify your creditors and resolve outstanding claims prior to a filing of the certificate of dissolution.
File a Certificate of Dissolution with the Secretary of State
Once you have checked off the prerequisites, you must file the certificate of dissolution in your domestic state of incorporation, along with any foreign state you hold a qualification to transact business. You may be responsible for annual reports and fees in each state for the year in which you dissolved your corporation.
Contact Spiegel & Utrera, P.A. for a free consultation and guidance through the process of dissolving a corporation. Call (800) 603-3900 or fill out our immediate assistance form above.