It is important to know dissolve a corporation correctly to minimize risks and liability.
There are several steps you must complete in a corporate dissolution whether you want to dissolve a corporation in Delaware, California, Florida, New York or another state. However, each state might run a bit differently, so make sure to talk to a corporate lawyer from your state to make sure you are dissolving the corporation the best possible way.
Read the steps below for a general guideline of dissolve a corporation.
Note: These are general guidelines. Each corporation is different, so get legal advice from your corporate lawyer before proceeding.
Instructions
1. ** Decide to dissolve your corporation **
The first step in dissolving a corporation is to determine whether or not dissolving your corporation is the best option. Before you close a company, make sure this is what your company really needs. Perhaps there are other options - such as taking out loans, starting a new product line, selling off shares, changing management, etc. Closing a business is a big step, so think wisely.
2. ** Conduct a board of director's meeting and formally decide to dissolve the corporation **
The board of directors must meet and agree to close the corporation.
Note: This is only a first stage. In order for corporate dissolution to be complete, the board of director's decision alone is not enough.
3. ** Get shareholders' approval for corporate dissolution **
Next, the shareholders must agree to dissolve the corporation. You must have a majority of shareholders agreeing. How many shareholders makes a majority depends on which state you are in.
4. ** Notify the IRS you are closing your corporation **
You have 30 days to send in IRS form 966. Send it to the address you usually send your corporate tax returns. Again, it is recommended to fill out this form together with your corporate lawyer.
Note: There are certain exceptions when the 966 form should not be used.
5. ** Cancel all licenses permits **
You must cancel all legal company names, licenses and permits that your company might have. This needs to be done on a city or county level.
6. ** Notify creditors and debtors **
In many states, you will need to notify your creditors and debtors that you are dissolving your corporation. This notification should give creditors a chance to make a claim for money you may owe them. You might also have to notify the general public. Again, talk to your corporate lawyer about if and do this.
7. ** Notify anyone else involved **
You must notify customers and employees that you are going out of business. Try to ensure that you compensate them as much as possible - both ethically and legally.
8. ** Pay off debts **
You must pay off any money or debts that you owe. You must pay off any money that your corporation owes before giving anything to shareholders.
9. ** Settle all taxes **
Make sure you pay up your taxes. Exact requirements regarding taxes before dissolving a corporation vary from state to state.
10. ** Divide up assets between shareholders **
After all debts are taken care off, whatever is left is divided between the shareholders. In general, the division should be based on number of shares each shareholder owns. This can be a tricky and time consuming process, especially if shareholders are not in agreement.
11. ** File Articles of Dissolution to notify the state **
Finally, to dissolve a corporation, the business must file Articles of Dissolution. Filing this form will notify your state that you are dissolving your corporation.
Tips Warnings
Make sure to to speak with a corporate lawyer who is familiar with laws regarding the state where your corporation is located.
Note: This article is based on research only. Contact a lawyer to make sure all the above applies to you and to find out what other steps you may have to take.
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