To dissolve your financial stake in a company, you must transfer all of your shares of corporate stock to another individual, which may be done via selling your shares. Selling your shares will move all of your ownership and liabilities connected to your financial stake in the company.
You are not required to file any papers with the state where the company is incorporated, nor do you have to withdraw yourself in any other manner from the company.
How Can I Disband the Whole Corporation?
There are multiple ways in which a whole corporation can be dissolved. These include:
- A suggestion by the Board of directors to disband that is later backed by shareholders
- Shareholders electing to disband the Board in light of a stalemate among the managers or wrongdoing by directors
- A judicial order indicating that a court has decided that the corporation must be dissolved
- Creditors liquidate all corporate assets to settle the debts owed to them
What Are the Phases of Dissolving a Corporation or Getting a Corporate Dissolution
Dissolving a corporation takes several vital actions. Such prerequisites may differ across the fifty states. Typically, it is suggested that business owners get legal help to file the required papers with the appropriate state agencies.
Call a Board Meeting
The first action in dissolving a corporation usually concerns having your Board of directors and shareholders vote to support the dissolution. Under most state regulations, you begin by meeting the Board of directors to vote on a solution to endorse the dissolution of the corporation. Once the Board has authorized dissolution, the issue can then be presented to the shareholders for their consent.
The precise regulations for the kind of vote and action needed by directors and shareholders differ state by state. You’ll need to review your state laws as well as your articles of incorporation and bylaws in case you have any particular conditions for dissolution. You will also want to ensure you deliver appropriate notice and keep adequate documents of any corporate activity taken on dissolution.
Once the Board has endorsed the ballot to dissolve directors, it must also be backed by a plurality of the corporation shareholders. A two-thirds vote is needed to comprise plurality shareholder authorization in specific states. A plurality of shareholders must support the intended dissolution, and their vote symbolizes their proper consent for dissolution.
The actual number of shareholders needed to be deemed a majority varies in each state. The written agreement pursuing dissolution and signed by all corporation owners must be conducted before a proposal for dissolution will be authorized by the Secretary of State.
File a Certification of Dissolution With the Secretary of State
Once you have the required corporate support to dissolve your corporation, your following action is to file an official certificate of dissolution with the state. Most states have a certificate of dissolution form that you can file by mail or, in some states, online.
Inspect your secretary of state’s website for your state’s dissolution form and filing conditions, including mandated payments. Even if a certification is not lawfully needed, it is highly suggested that you file a certificate with the secretary of state to meet the unforced dissolution of your corporation.
You can reach the Office of the Secretary of State in the state where your company is incorporated to receive the required forms needed to file an authorized Certificate of Dissolution with the government agency, or you can file the paperwork online.
Most states have an Incorporation Bureau or a likewise established agency that handles incorporation. It may be dubbed a Corporation Commission or Corporation Agency. You may locate the Incorporation Bureau in your state listed online.
Tell the Internal Revenue Service (IRS)
Once you autograph and file the dissolution forms with the state agency, you should subsequently tell the Internal Revenue Service (IRS) to report your planned company dissolution to the agency.
It is essential to settle all taxes due to the state and the federal government to get a “consent to dissolution” or a “tax clearance.” Typically, these forms are mandated by the Office of the Secretary of State to get a legal dissolution of a corporation. On the state and local tax return records, mark the box “Final Return.”
Do I Need to Close Bank Accounts and Credit Lines and Cancel Licenses?
Do not fail to close all bank accounts, credit lines, and service accounts kept in your corporate or business title. You will want to end all licenses, permits, and fictitious names.
Ultimately, be certain you inform all clients and merchandisers about your corporation’s dissolution.
If you launch each action correctly, you will successfully complete your corporation’s dissolution.
Winding Up Your Company
Following dissolution, your business continues to live to wind up its business. This typically suggests removing all of the corporation’s liabilities and debts, settling all unpaid claims and suits against the business, and disseminating any remaining investments to stockholders.
Message to Claimants
Another critical duty with dissolution is to notice anyone with a possible assertion against your business. While this may not be lawfully needed, it aids in restricting your liability. It lets you make the last distributions of your corporate investments to shareholders more safely. There are stringent laws about providing reasonable notice, so you may want to confer with a business lawyer if this is a problem for your business.
Some states demand you to get tax clearance before you file your certificate of dissolution. Others instruct you to produce all taxes due before filing your certificate. You must check your state laws for dissolution and tax clearance. On your last state and federal tax filing, you check the “Final Return” box to demonstrate that you have disbanded your business.
Bank Invoices, Receipts, Out-of-State Enrollments
Make sure you close all your company bank accounts and credit lines and cancel any permits, licenses, or anything else contained in your company’s name. You’ll also want to inform your buyers and sellers about your organization’s dissolution. Suppose your business is enlisted or eligible to do business in another state. In that case, you must file the required forms to end those.
Can a Corporation Stay Inactive, or Does it Have to be Dissolved?
An idle business may stay registered with the state as long as the corporation stays in good standing. The business must continue to file instructed annual accounts and pay annual company taxes to stay in good standing. Other conditions to stay in good standing are state-specific. Studying the needed measures to remain in good standing and taking those steps each year could be more expensive and time-consuming than disbanding the company.
What are the Effects of Not Dissolving a Corporation?
There can be consequences for deciding to let the corporation stay stagnant. In some states, a company could encounter fines if it stays inactive and does not remain in good standing. If the state administratively liquefies the corporation, owners could be personally responsible for any unpaid obligations and liabilities. Likewise, other fines and interest on accrued taxes could become the owners’ liability once the state dissolves the company.
Because there could be a substantial penalty for owners who permit a company to become inactive, it is normally best to know how to dissolve a corporation and pursue the dissolution. There could be occasional instances in which it might be most reasonable to allow the corporation to stay inactive for a brief time. Suppose owners have inquiries about whether it is soundest to move forward with the corporate dissolution or enable the company to stay inactive. In that case, it’s smart to get assistance from an experienced corporate law or business law lawyer.
Many aspects affect the time it takes to dissolve a corporation. More giant companies may take much longer to liquefy than smaller companies. The corporation’s kind of business may affect the dissolution timeline, as do state and federal rules for closing specific companies. Business law lawyers are usually useful because they comprehend how to dissolve a corporation and progress through each step efficiently to sidestep undue uncertainties and issues.
Do I Need an Attorney to Help Dissolve My Corporation?
Use LegalMatch to find a lawyer near you. Only a short discussion with your corporate attorney is needed if you only want to pull out your interests from the corporation, as you only need to sell all of your shares to accomplish that.
However, suppose you want to dissolve the entire corporation. In that case, you should speak with an attorney who has experience with all the required legal steps. Your communications with your attorney are protected by attorney-client privilege.