Dissolve a Corporation

The formal conclusion of a corporation and the subsequent cessation of business operations is referred to as “dissolution,” a multifaceted process involving several requisite steps. While the guidance of a legal professional or tax advisor can prove invaluable, it is possible to informally dissolve a company by halting all business activities.

However, opting for this informal dissolution is not the optimal or exclusive route, as it exposes the corporation to potential legal repercussions and lingering liabilities. It is imperative to recognize that the state maintains an expectation for the corporation to fulfill and adhere to all legal obligations until the formal dissolution process has been duly completed.

1. Board Resolution for Dissolution:

• Initiate the dissolution process by obtaining a board resolution for dissolution. This formal resolution should be passed by the majority of the board members and documented in the corporate records. Ensure compliance with any specific requirements outlined in the corporation’s bylaws.

2. Shareholders’ Approval:

• Obtain shareholders’ approval for dissolution. This usually involves calling a special meeting of the shareholders and securing a majority vote in favor of dissolution. Document the proceedings meticulously, including the date, time, and voting results.

3. Fulfill Obligations:

• Conduct a comprehensive review of the corporation’s financial affairs. Settle outstanding debts, pay creditors, and ensure all taxes are up to date. Fulfill contractual obligations and address any legal requirements before proceeding with the dissolution.

4. File Articles of Dissolution:

• Prepare and file the Articles of Dissolution with the Secretary of State’s office in the state where the corporation is registered. This document officially notifies the state of the corporation’s intention to dissolve. Pay any required filing fees and adhere to specific formatting and content guidelines provided by the state.

5. Notification to Creditors:

• Issue formal notifications to known creditors of the corporation’s impending dissolution. Provide a specific timeframe for creditors to submit their claims. This step helps ensure that the corporation addresses all outstanding obligations before finalizing the dissolution.

6. Distribution of Assets:

• Develop a plan for the distribution of remaining assets among shareholders. This may involve selling assets, settling liabilities, and distributing any remaining proceeds among shareholders according to their ownership interests. Clearly document the asset distribution plan.

7. File Final Tax Returns and Obtain Tax Clearance:

• Complete and file the final federal and state tax returns for the corporation. Obtain any necessary tax clearance certificates from state tax authorities. Ensure that all tax obligations are satisfied before moving forward with the dissolution.

8. Cancel Registrations in Other States:

• If your corporation has been duly registered to conduct business in multiple states, it is imperative to submit a formal withdrawal form to relinquish the authorization to transact business in each respective state. This form may be denoted as an “application of withdrawal,” “certificate of termination of existence,” “termination of registration,” or “certificate of surrender of right to transact business.”

9. Close the EIN and Bank Accounts:

• Close or cancel any business licenses or permits linked to your company. In addition, once you’ve filed all tax returns and paid taxes, close your employer identification number (EIN) and state identification tax number. This signals to the IRS that your business is closed and you won’t be filing any more tax returns.Notify the bank of the LLC’s dissolution and request the closure of all business accounts. Clear any outstanding transactions and transfer remaining funds according to the agreed-upon distribution among members. Obtain confirmation of account closure.

10. Final Filings and Record Keeping:

• File any additional required documents with state authorities, such as final annual reports. Maintain meticulous records of the entire dissolution process, including meeting minutes, filings, notifications, and distribution of assets. Store these records in a secure location for future reference or audits.