If you’ve chosen to dissolve your corporation or limited liability business, you must submit articles of dissolution to avoid future obligations for reports, taxes, and fees.
You’ve generally moved on to other things by the time you decide to shutter a company — a new initiative, a new job, or the freedom of retirement. Formally ending a business may seem to be simply another task that will require time and money.
To properly end a company, however, you must submit articles of dissolution with your state. Filing articles saves you money in the long run and provides you a feeling of finality. This article will teach you how to end a business and walk away for good.
What Are Articles of Dissolution and Why Do I Need to File Them?
If you formed your firm as a limited liability company, you had to submit articles of incorporation with the state. If your company is a corporation, you must have filed articles of incorporation. These paperwork formalised your company as a distinct legal entity. In many jurisdictions, business entities such as LLCs and corporations must pay yearly taxes or fees or submit annual reports.
Articles of dissolution are the inverse of articles of organisation or incorporation in that they terminate the existence of your company entity. If you don’t submit articles of dissolution when you shut a business, the state will presume you’re still in operation and will require you to produce reports and pay taxes and fees. If you do not, you may face further fines and penalties.
Articles of dissolution also notify creditors that your company has dissolved and that you are no longer accountable for obligations.
General Partnerships and sole proprietorships
To discontinue a sole proprietorship, you do not need to submit articles of dissolution; but, in certain states, if you filed partnership paperwork with the state, you must legally dissolve the partnership.
The company filing agency in your state can clarify the requirements in your state.
The processes to dissolve an LLC or Corporation are as follows.
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Vote to Dissolve
No matter how your company is structured, you should have a formal vote on dissolving the company and save a written record of the vote. To dissolve a corporation, see your bylaws for information on who must vote, how the vote must be performed, and the number of votes required to ratify the dissolution. You should record the vote in a resolution that you retain with your business documents.
Consult your LLC operating agreement for the voting method to be followed when dissolving an LLC. If you don’t have an operating agreement, be sure you fulfil the requirements of your state’s LLC legislation.
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Inform Your Creditors
Once you’ve chosen to shut an LLC or a company, you should contact your creditors, informing them of your decision and informing them of the deadline for filing claims. The deadline is set by state legislation. It is usually between 90 and 180 days following the date of the notification in most states. In addition, your notification should inform your creditors that any claims received after the deadline are disallowed.
Before filing articles of dissolution in several states, you must inform creditors. By issuing a formal notice, you set a timetable for wrapping up your company activities and reduce the likelihood that a creditor may emerge long after you’ve gone out of business.
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Organise your taxes and licences
Contact your state and local taxation authorities to see whether you owe any taxes, and then pay them. Before you may file articles of dissolution in certain states, you must get a certificate certifying that your firm has paid all of its taxes.
If you have workers, be sure to deposit your final payroll taxes.
You must also submit your last federal and state employment tax returns. Whether you fail to pay your payroll taxes, the IRS may hold you and your co-owners personally accountable — even if your company is a corporation or an LLC.
Finally, if your company has licenced or registered false business names, contact local licencing authorities and arrange for them to be cancelled.
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Draft the Articles of Dissolution.
You may create articles of dissolution by filling out a form on the website of the state office in charge of company filings in your state. In most states, the secretary of state is in charge of this.
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Submit Articles of Dissolution.
To finalise your corporation or LLC dissolution, the dissolution documents must be filed with the secretary of state or another state business filing agency. Exact methods and costs vary by state, but in most states, you must submit the form in person or by mail and pay a filing fee.
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Other Steps in Business Closing
After you’ve paid your taxes, you may start paying off your other debts. After you’ve paid everyone, you may terminate your company bank account and distribute any remaining cash to the business owners. If you are unable to pay all of your company obligations, you may be able to negotiate with your creditors or seek help from a bankruptcy lawyer.
If you have registered to conduct business in other states, contact those authorities and revoke your registrations. If you don’t, your company may be held accountable for taxes or yearly reports in certain states.
You must also submit your last federal and state tax filings and deactivate your company’s Federal Employer Identification Number.
When shutting a company, formally dissolving it by filing articles of dissolution is a simple approach to protect oneself from potential liabilities. To further protect yourself, inform taxation authorities, pay your taxes, and notify and pay your other creditors before you permanently shut your doors.