Letter of Dissolution: Everything You Need To Know
A letter of dissolution is an official notification of the end of a business relationship with a partner, client, vendor, or another party.3 min read
A letter of dissolution is an official notification of the end of a business relationship with a partner, client, vendor, or another party. The content of this letter depends on the type of business arrangement that is ending and legal regulations that must be satisfied based on the industry, location, and other factors.
Basic Letter of Dissolution Elements
Although the content will vary, certain elements should be included in every letter of dissolution. These include:
- The name of the recipient and the name of the person sending the letter
- The purpose of the letter, including the relationship to be terminated and the date of termination, stated in the first paragraph
- Information about the specific reasons for dissolution, including but not limited to bankruptcy, retirement, the death of a partner, or business disagreement
- Conditions about settling outstanding debts and obligations
- The chapters and sections of the partnership agreement that refer to dissolution procedures, which give your letter legal support and allow it to be recognized as legally binding by the court
- The names of open vendor and business contracts and the intent to close these contracts before dissolution
- The value of all pending contracts
Types of Dissolution Letters
Letters of dissolution are used for a range of business arrangements, including relationships between business partners, among corporations, and with suppliers and vendors. Some of the most common uses for this type of document include:
- Terminating an existing contract, often because of a breach of its terms
- Terminating a relationship with a business partner because of differences in opinion on how to conduct business
- Notifying customers, vendors, and stakeholders that the company is ending operations and discontinuing its status as a legal entity
Dissolving a Partnership
Any partner can end a partnership even if the other partners do not want it to dissolve. If you are ending a business partnership, refer to your original partnership agreement and follow the procedure for dissolution. A professional letter that emphasizes the legal aspects of the dissolution limits the ability of other partners to prevent the business from closing.
Use the full legal name of each business partner to avoid legal ambiguity that can hinder the dissolution process. This also conveys the professional and serious tone of the letter's content.
Avoid using emotional or inflammatory language in a dissolution letter. This can lessen the anger partners may feel upon learning of your intention to end the partnership. In addition, emotional statements may leave legal room for the partners to argue against the dissolution. If they decide to sue, the resulting legal battle could drag on for months or years.
Steps To Dissolve a Corporation
In most states, the required steps to dissolve your business entity include:
- Notifying board members of intent to dissolve using the most common means of communications
- Holding a board member vote for approval of dissolution
- Writing a letter of dissolution to the secretary of state
- Submitting a notice of intent to dissolve to the attorney general
- Notifying the secretary of state of approval to dissolve from the attorney general
- Paying off creditors and resolving existing contracts
- Distributing remaining assets as detailed in the original business agreement
- Submitting details about how assets were conveyed or transferred to the office of the attorney general
Dissolving a Minnesota Corporation
As in most states, dissolving a corporation in Minnesota requires a meeting and vote of the board. A member or small group of members cannot make the decision to close the business without a vote.
The minutes from the meeting at which the vote takes place must include the date and location of the meeting. Submit a copy of the minutes to the state attorney general along with a Notice of Intent to Dissolve.
At the meeting, you must introduce a resolution that proposes dissolution and it must be passed by an officer majority. The resolution must include a plan for asset distribution upon dissolution. This plan must adhere to organizational bylaws.
You should also resolve to designate an individual responsible to sign and submit dissolution paperwork. After the dissolution resolution is passed, formal business must be limited to wrapping up the business matters.
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