There are steps you need to take. Those planning to dissolve their businesses—especially their first one—often ask if they can just walk away. The lease ends, you clear the space, and you simply stop running a business.
If you don’t take the proper steps, you could leave yourself open to potential lawsuits. For example, imagine that you own a business that builds homes. You decide to close the company after you finish the last house for whatever reason.
To make things easy, you have no debts, creditors, etc. Should you fail to dissolve your business correctly, the owners can still file suit against your company that still legally exists—even though you are no longer running it. When you dissolve your business correctly, it limits your liability.
Approval & Filing
Corporations and LLCs have bylaws and operating agreements. Not only will these usually define the dissolution process, but they should also state who has to approve it. In addition, the laws regarding dissolution for a corporation differ from those for LLCs. You will want an experienced attorney to help guide you through the process.
When you have the approval to do so, you (or your attorney) file Articles of Dissolution with the state where the business was formed.
Creditors & Taxes
Another reason why you cannot close the doors on your business and leave is because you may still owe taxes. Both your attorney and accountant (if you have one) will be excellent resources to ensure you have no further tax obligations. Along those same lines, you need to settle your business’s debts.
In most cases, each of your company’s creditors should be notified (by mail) that the business is dissolving. Your attorney should play a role in this. There is a designated timeline in which your creditors can claim the money they are owed. Regardless, your attorney will know what is required of you regarding creditor notification. Do it once and do it right.
Once your creditors have been paid, you can distribute the remaining assets. Typically, this is done by ownership percentage. If you and your partner each own 50%, you split the assets evenly.
Neve Webb
Dissolving your business correctly is a means of limiting your liability. If you have further questions about how this process works or other business law questions, contact Neve Webb to schedule your consultation.
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