Many business owners decide to dissolve their companies instead of selling when they face financial problems. Each business situation is different, and there are many factors to consider when choosing dissolution. Business owners and board members should always seek legal counsel before beginning the process.
A Corporate Dissolution
If a company does not require bankruptcy protection, corporate dissolution might not be necessary. Companies capable of paying obligations and continuing their businesses are solvent, so the process is different. Companies that cannot continue business due to financial constraints can file for dissolution, which is less expensive and will help the company liquidate assets without foreclosure.
The help of skilled attorneys will ensure that dissolution protects owners from future claims against the business. A legal team can also protect board members and directors from personal liability claims. The process is labor intensive, requiring a good deal of strategy regarding timing and affair management.
What Happens in a Corporate Dissolution
The process of terminating a business entity begins with the decision to dissolve, which requires shareholder approval. The company must elect one director and one manager to manage the dissolution. It can also hire professional firms to handle the wind-down. Once board approval is complete, the plan for liquidation will start. The company must create a formal plan for shutdown, paying obligations, and preparing taxes.
The company then files a tax report, the Certificate of Dissolution, and report to the Internal Revenue Service. A formal claims process will begin, allowing outside parties to stake claims against the company. The claims will receive a review, resulting in a denial or acceptance. Any lawsuits the company is involved in will wrap up in a timely matter.
Once the resolution of claims and lawsuits is complete, the company will complete the process and file a final tax return. It must file paperwork to withdraw from doing business. The company must also make a final distribution to creditors and shareholders.
Choosing Corporate Dissolution
Before deciding to dissolve a business, contact us at Bennett, Weston, LaJone & Turner, P.C., for professional guidance. In many cases, dissolution is the best method for handling the end of a business. With the involvement of government offices and corporate governance laws, the process can be tedious. There are many loose ends to tie up, including creditors, taxes, shareholders, and claims. If your company does not need protection from bankruptcy, a corporate dissolution may be the process for you.