Key Takeaways

  • Dissolution requires formal resolutions and documented approval from shareholders or LLC members.
  • A certified copy of the resolution to dissolve is needed when filing IRS Form 966.
  • Both corporations and LLCs must notify creditors, file dissolution paperwork with the state, and settle all debts.
  • LLCs often must file both a Certificate of Dissolution and a Certificate of Cancellation.
  • In some cases, dissolution can occur without state filing by ceasing business operations and allowing registered agents to resign.
  • Final tax returns and cancellation of licenses and permits are critical steps in the winding-up process.

A certified copy of a resolution to dissolve a corporation is an important document to maintain when it comes time to dissolve a company. This form is required by the IRS along with Form 966.

Dissolving a Corporation

When it comes time to dissolve or wind up a corporation, there are multiple steps to follow, though the process is not a difficult one. The process is simple enough to be completed on your own, though it is advised to retain the services of an attorney that has experience in the process to make sure that all the steps are met and filed on time.

Shareholder and Director Vote

Before a company can be dissolved, shareholders will need to have a vote, and a 50 percent vote of shares is required to dissolve a corporation voluntarily. The voting can occur at a shareholders meeting or simply be done by filing written consent. In the event that a corporation has no shareholder, then it is up to the company's board of directors to have a majority vote to dissolve a company. If this occurs, the directors will need to file a formal resolution. In the formal resolution, it should be stated that:

  • The Board has the authority to create the dissolution.
  • That there are no shareholders.

Filing of Certificate With the Secretary of State

When a dissolution of a company occurs, the business is required to file a Certificate of Dissolution with the Secretary of State's office. There are some things you need to know when filing your certificate including:

  • The Certificate of Dissolution must be signed by the majority of directors.
  • The corporation will not be legally dissolved until the Certificate of Dissolution is filed with the state.
  • An officer of the company will need to create the document and sign it.
  • The Certificate of Election to Wind Up and Dissolve is required to be signed by the majority of directors, the majority of shareholders, or 50 percent or more of those who represent the majority of voting shares.
  • The Certificate of Election to Wind Up is not required if the election was made by a vote of all outstanding company shares.

Notice

Notices must be mailed promptly after the dissolution has been filed. Notices need to be provided to:

  • All creditors and claimants.
  • All shareholders who did not vote in favor of the dissolution.

Tax Filings

Within 30 days of the resolution adopted, an IRS Form 966 must be filed. Along with the form, you must send in a certified copy of the director's resolution. These files will need to be sent to the district director for the district in which the corporate tax is filed. If any amendment or supplement to the resolution occurs, you will need to file an additional Form 966 within 30 days of the adoption of the amendment.

You also must file a return under section 6043 which will provide information on liquidation and the gains and losses of the shareholders. If you pay franchise taxes, you must also file a final tax return.

Provisions or Payments for Debts

When a dissolution occurs, the Board of Directors will need to satisfy all debts and liabilities or create provisions for these to be settled before they can distribute the remaining assets among the shareholders.

Understanding the Resolution to Dissolve LLC

While the steps to dissolve a corporation and an LLC are similar, there are distinctions—especially in how resolutions are documented and filed. For an LLC, dissolution typically begins with member approval through a resolution to dissolve the LLC. The LLC’s operating agreement or Articles of Organization will usually detail the process, including:

  • The required percentage of votes to approve dissolution (commonly a majority or supermajority).
  • Procedures for calling a meeting and providing notice to members.
  • Documenting the vote through a formal resolution, which should be kept in the LLC’s records.

Even though the IRS does not specifically require LLCs to file Form 966 unless taxed as a corporation, a resolution to dissolve the LLC is essential for legal and recordkeeping purposes. In most states, this resolution is not filed with the state but must be retained internally and presented if needed for legal or tax matters.

State Requirements for Filing LLC Dissolution

Once an LLC has approved the resolution to dissolve, it must usually file one or more documents with the Secretary of State to formalize the dissolution. These include:

  • Certificate of Dissolution: States like California require this if not all members unanimously vote to dissolve the LLC.
  • Certificate of Cancellation: This document formally ends the LLC’s rights and responsibilities in the state and confirms that tax returns have been filed.

Each state has its own forms and filing fees. Some, such as California, waive filing fees under specific conditions or allow online submission via state portals.

Failing to file proper dissolution paperwork may result in continued tax obligations, penalties, or legal liability.

Additional Steps After Filing the Resolution

Dissolving an LLC or corporation involves more than just filing documents. Following the adoption of a resolution to dissolve, the entity must:

  • Notify Creditors and Claimants: Formal written notice helps limit future liability.
  • Distribute Assets: After debts and taxes are paid, remaining assets should be distributed according to ownership shares or contributions.
  • Cancel Licenses and Permits: Business licenses, fictitious name registrations (DBAs), seller’s permits, and out-of-state registrations must be canceled to avoid ongoing fees.
  • Close Business Bank Accounts: Ensure all financial obligations are fulfilled before account closures.

These steps are crucial for fully winding up the business and avoiding unwanted complications or legal exposure.

Winding Up Without the Certificate of Dissolution

There are some corporations that do not want to incur the additional expenses that come with filing a Certificate of Dissolution. If you wish to wind up your corporation without filing a certificate, you can ask your designated registered agent to resign. In the event, your company's registered agent quits by filing a Certificate of Resignation with the state, your registered agent will be removed, and it will remove your corporation from good standing. When this occurs:

  • Your company will be void, and your name will go back into the available database.
  • Your Franchise Tax will no longer accrue.

It is important to note that to do this requires the resignation of your registered agent. If you simply cease daily operations of your business and stop paying taxes, you can end up accumulating fees and interest.

Risks of Failing to Properly Dissolve an LLC

Some business owners mistakenly believe that ceasing operations alone is sufficient to dissolve an LLC. However, failing to file official dissolution documents and cancel licenses may lead to:

  • Continued Tax Liability: Franchise taxes, annual fees, or penalties may continue to accrue even if the business is inactive.
  • Loss of Legal Protection: Members may be held personally liable for claims made against the LLC after informal dissolution.
  • Loss of Business Name Rights: Without formal cancellation, your business name may remain reserved and unavailable for future use or re-registration.

LLC owners should complete all dissolution steps properly—even if the LLC never conducted business—to avoid future complications.

Frequently Asked Questions

What is a resolution to dissolve an LLC? It is a formal document that records the decision by LLC members to end the business, often including the date of the meeting, vote results, and authorization to file dissolution paperwork.

Is a certified copy of the resolution required for LLC dissolution? For corporations, a certified copy is required when submitting IRS Form 966. LLCs taxed as corporations should also provide this. Otherwise, it should still be kept for legal recordkeeping.

Can I dissolve my LLC without filing with the state? In some cases, if you stop operating and let your registered agent resign, your LLC may fall out of good standing and become inactive. However, this is not recommended due to lingering liabilities.

How soon must I file IRS Form 966 after the resolution? Form 966 must be filed within 30 days of adopting the corporate resolution to dissolve. If there are amendments, a new Form 966 must be submitted within 30 days of each change.

What happens if I don’t properly notify creditors? Failure to notify creditors can leave the LLC or its members vulnerable to future legal claims and liabilities.

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