How Long Does It Take to Dissolve a Company
How long does it take to dissolve a company? The length of time it takes to process an application to dissolve varies from state to state.3 min read
2. Voting to Dissolve
3. Filing Articles of Dissolution
4. Filing Tax Forms
5. Liquidating Assets
6. Settling Debts and Obligations
7. Sending Notices
8. Certificate of Dissolution
How long does it take to dissolve a company? The length of time it takes to process an application to dissolve varies from state to state. It is vital, however, that you follow some basic steps. Otherwise, you might unnecessarily delay the process.
The Steps to Dissolution
There are six key steps to dissolving your business:
- Voting to dissolve.
- Filing articles of dissolution.
- Filing tax forms.
- Liquidating assets.
- Settling debts and obligations.
- Sending notices to interested parties.
The order in which you need to follow these steps will differ depending on your state government's policies. Check with your legal counsel to be sure you take the necessary steps in the correct sequence.
Voting to Dissolve
To dissolve your business, you first need a resolution to dissolve. If the company is publicly held, the board of directors will create this resolution. This is then put to the shareholders for a vote. If your business is not publicly held, the owners will draft this resolution. Regardless of whether your business is publicly held, be sure to document the process and the result.
Filing Articles of Dissolution
Assuming the shareholders all agree to the dissolution, you then must file Articles of Dissolution in the state where you incorporated the business. The Articles of Dissolution formalizes your intention to close your business, just as you filed Articles of Incorporation to start your business. After filing Articles of Dissolution, the company will cease to exit.
Filing Tax Forms
You need to notify the Internal Revenue Service (IRS), as well as the tax agency in the state in which you incorporated your business, of your intention to dissolve. If you do not, you will continue to be liable for taxes on your business. The IRS will require a tax return for the year of dissolution. You also need to file employment tax returns for any employees you have.
You might need to file other state-required documents. Get help from a tax expert in your area to be sure you fulfill these obligations both on the federal and the local level.
Also, be aware that the IRS does not cancel your Employee Identification Number when your business dissolves. It assigns that number to your business when it incorporated, and it is never reassigned. Your company's Employee Identification Number remains permanently associated with your business. This is good to know if you ever need to use it again.
You will need to liquidate, or sell, any assets you are not using as loan collateral. How much of the business's assets you are able to sell depends on whether the company is solvent at dissolution. It also depends on how much cash and liquid assets you have. If you have assets that are loan collateral, your company must either give them to the lending institutions or pay off the lending institutions before selling those assets for cash.
Settling Debts and Obligations
Settle any outstanding obligations your business incurred prior to closing. These liabilities include goods or services people have purchased from you, but you have yet to deliver and any short-term or long-term debts. You must also file your final federal and state payroll and corporate income tax forms. Whatever is left of the company's cash value after you have settled all liabilities goes to each of the owners or shareholders.
The final legal notice of dissolution goes to any party that has a vested interest in the company's well-being. For example,
- Shareholders and owners.
- Internal Revenue Service.
Each state has its own rules regarding who should be on this list. Be sure to check with your legal counsel to make sure you comply with your state's obligations.
Certificate of Dissolution
A Certificate of Dissolution, or a Certificate of Status, serves as official documentation that your company is no longer active. Some states will send you one automatically; others offer one for a nominal fee. It merely serves as official evidence that your company has been dissolved and is not legally required.
If you need help dissolving a company, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.