The time may come when business dissolution is appropriate. It is important to take the proper steps to terminate the legal entity and ensure no liability attaches to the owners subsequent to closing doors
• Examine the Operating Agreement; whether a corporation, partnership or LLC, the operating agreement should have a dissolution section describing procedures. Typically, a resolution is drafted and approved by the directors and voted on by the members.
• Look to the State of Incorporation’s Requirements; each state has paperwork required for dissolution. Be certain it is clear if any back taxes or fees are owed and the procedure for resolution is followed.
• Notify all Relevant Parties; creditors, vendors, landlords and customers are among those who need to be made aware of the dissolution. This should be done in such a time frame as to allow any outstanding issues to be raised.
• Business Debts; all known creditors should be notified with specific information stating when all outstanding claims must be filed or the opportunity may be forfeited.
• Business Assets; the corporate document typically directs how outstanding shares are to be handled, but a company may also have assets with cash value such as equipment or buildings to be distributed once all debts and creditors are paid.
• Final Tax Filing; tax returns for federal, state and local governments must be completed and filed for at least the year in which the business closed, and maybe for some time after dissolution if any income continues to be received or debts paid.