Dissolving A Business

When A Corporation Ceases To Operate

Taking the steps necessary to dissolve your company and avoid future liability

One of the advantages of an LLC or corporation is that it can exist in perpetuity.  However, this can result in a situation in which even after all business activity ends, the business entity still exists unless it is properly dissolved.  Failure to dissolve the business entity when business operations come to an end can expose the business or its owners to unnecessary future liability.  When the decision is made to close a business, specific steps should be taken so that the business entity is legally dissolved.

The decision to dissolve the business needs to be made by the appropriate business owners in consultation with a business law lawyer.  The bylaws of a corporation or the operating agreement of an LLC will dictate the internal procedures needed to begin the process and will specify who is required to make the decision to dissolve the business.  Once the ownership has approved dissolution, there is paperwork to be prepared and filed with the necessary government offices.  Additionally, all debts will need to be satisfied with company creditors and any ongoing litigation will need to be settled or resolved.  After all of the liabilities are taken care of, the company’s assets should be liquidated and distributed according to the bylaws or operating agreement.  Under some circumstances, a company will be considered to exist—even if it has been dissolved—for purposes of wrapping up its affairs and paying its debts.  Just dissolving a company will not make its debts go away, and may in fact worsen the situation by imposing liability on the owners.

The above items are some of the basic tasks that need to be completed to dissolve a business.  The dissolution of each business will have unique circumstances.  However, going through the proper process will minimize future liabilities.