Take action to properly dissolve your corporation or LLC

Dissolution documents must be properly filed

Once the dissolution has been approved by the entity, a Certificate of Dissolution (also called Articles of Dissolution or Certificate or Articles of Termination) must be filed with the company’s home state. The appropriate filings must also be made in any other states where your corporation or LLC is qualified to transact business.

The process for properly filing dissolution documents varies by state and may require the filing of a statement of intent to dissolve, a tax clearance, and notification to, and settlement of, creditors’ claims.

Tax clearance often required to effect dissolution. Many states require a dissolving entity to obtain a tax clearance as proof that no back-taxes are owed before filing dissolution papers.

Warning

The rules regarding obtaining tax clearances can vary widely from state-to-state. In some states, a tax clearance may take a lengthy time to obtain, slowing down the entire dissolution process. Check with the secretary of state for the tax clearance rules you need to comply with when dissolving a corporation or LLC.

State rules vary regarding creditors. State law requires that a company that is dissolved or intends to dissolve notify its creditors of its dissolution and provide the information needed by creditors in order to submit their claims. The information that must be provided includes the deadline for submitting claims, which is usually 120 days from the date of notice. Some states require dissolving entities to publish notices of dissolution to notify creditors not known to the corporation and allow them to submit claims.

Work Smart

State statutes regarding notifying creditors of a company’s dissolution and settling creditors’ claims are tricky on two fronts. First, creditors’ claims may be rejected by your business, or accepted and paid in full, or subject to arrangements made with the creditors. You must comply with state statutes when notifying creditors as well as when settling claims, therefore you should consult your attorney so that you don’t run afoul of state laws.

In addition, some states require that you notify creditors and resolve claims before the dissolution documents are filed with the state. Conversely, some states require the dissolution documents be filed prior to notifying the business’s creditors and settling claims. Check the requirements with the appropriate secretary of state so that the dissolution process is not halted.

Tax filings are required for dissolution. When you dissolve your business, you must be sure to file the required federal, state and local tax returns and documents. These filings are frequently time-sensitive.

Tip

Consult your accountant or tax advisor for the tax requirements you must fulfill and the deadlines for doing so, including how to report the distribution of assets to the Internal Revenue Service (IRS).

Remember to cancel business licenses and permits

An often overlooked piece of the dissolution process is the cancellation of licenses and permits held by the business. Because licenses and permits are issued at the federal level as well as multiple state and local government levels, numerous cancellations may be required depending on your business’s industry and where you transact business.

Work Smart

Whatever the reasons for dissolving your company, there’s little doubt that you will have multiple responsibilities regarding the end of your business operations. You may find it beneficial to outsource the preparation and filing of the dissolution documents with the state to an entity compliance company, such as BizFilings. Doing so takes one major task off your list of dissolution duties and ensures that it’s done correctly and in a timely fashion.