It is more difficult to dissolve a company than it is to organise one. But, like with anything corporate, it’s as simple as learning and following the proper protocol.
You must submit Articles of Dissolution (also known as a Certificate of Dissolution) to tell the state that you are terminating or dissolving the company, just as you would file Articles of Incorporation to establish your corporate organisation and bring it into life. The following are some easy processes for dissolving a company.
How to Dissolve a Corporation
The process of dissolving a company and shutting down corporate activities is called as “dissolution,” and it entails multiple processes.
Often, the advice of a lawyer or a tax specialist is beneficial.
You may certainly dissolve a corporation informally by discontinuing all business operations. However, this is not the best (or even the only) solution since it exposes you to possible litigation and liabilities in the future.
Do not assume that by ceasing business activities, the company has come to an end. Legally, the company continues to exist as a commercial entity whether or not you continue to perform business activities.
Keep in mind that the State expects the company to complete and comply with all legal obligations until the corporation is finally disbanded.
How to Dissolve a Corporation or Get a Corporate Dissolution
It requires many important actions to properly dissolve a firm. These criteria may differ amongst the fifty states. It is often suggested that company owners get legal counsel before filing the required forms with the appropriate state authorities.
Call a Board of Directors meeting.
It is advised that after you have chosen to cease the activities of a business, you convene a Board of Directors meeting to legally move to dissolve the corporation. A vote must be held, and the minutes of the meeting must be recorded and kept in the corporation’s records.
Once the Board of Directors has authorised the dissolution vote, it must be approved by a majority of the corporate shareholders (if there are shareholders). A two-thirds vote is necessary in certain jurisdictions to establish a majority of shareholder approval. A majority of shareholders must approve the proposed dissolution, and their vote serves as their legal permission.
The specific number of shares necessary to constitute a majority varies by state. Before the Secretary of State will grant a request for dissolution, the written agreement for dissolution must be completed and signed by all owners of the company.
Submit to the Secretary of State a Certificate of Dissolution.
You may either call the Office of the Secretary of State in the state where your business is established to receive the documents needed to submit an official Certificate of Dissolution with the government agency, or you can do so online.
The majority of states have an Incorporation Bureau or a comparable entity that governs incorporation. It might be referred to as a Corporation Commission or a Corporation Agency. You may even be able to locate your state’s Incorporation Bureau online.
- Make a report to the Internal Revenue Service (IRS)
After signing and filing the dissolution documents with the state agency, you should notify the Internal Revenue Service (IRS) of your intention to dissolve the corporation.
To acquire a “permission to dissolution” or a “tax clearance,” it is important to pay all taxes owed, both to the state and to the federal government. In general, these documents are necessary by the Secretary of State’s Office in order to secure official dissolution of a company. Mark the “Final Return” box on the state and local tax return paperwork.
Cancel licences, cancel accounts and credit lines, and so forth.
Don’t forget to shut any bank accounts, credit lines, and service accounts in your company’s or corporation’s name. You should also cancel any licences, permits, and/or permissions for fake names.
Finally, be sure to inform all customers and suppliers of your company’s demise.
If you follow each step correctly, you will be able to effectively shut your firm.