Dissolving a business is often a stressful and complex process. However, it is important to legally and correctly dissolve a business in a timely manner. If you fail to properly dissolve your business, you may face additional liabilities in the future and have to endure extra legal hassles down the road, even if your business operations have ceased. That is why our firm wants to educate business owners on the steps to legally and completely dissolve their businesses.
Here are 6 necessary steps to dissolve a business:
- Close the business according to business articles. If your business is a partnership, corporation, or LLC, you will need to follow the stipulations in the business articles when processing a dissolution. However, sole proprietors or partnerships without a written agreement may not need to go through this step. For LLCs, the members generally must grant approval to shut down a business. On the other hand, corporations rely on the approval of shareholders. Whatever your situation, be sure to follow the proper procedures laid out in the business agreement when dissolving your business.
- File the necessary documents with the state. Georgia requires business owners to write a Certificate of Termination letter, and to file Articles of Dissolution. Depending on the situation, these documents must include the name of the corporation and the date it was incorporated, the date the dissolution was authorized, and statements claiming that the corporation has no debt, has not issued shares or commenced business, and that a majority of directors or shareholders have authorized the dissolution. Corporations that have issued shares or commenced business will also need to file a Notice of Intent to Dissolve, in addition to the Articles of Dissolution. There is no filing fee for any of the forms.
- File the necessary tax forms. Federal, state, and local tax requirements must be met when you dissolve your business. You can formally close the business with the IRS and other taxing agencies by filing the correct forms. If you have employees, you will also need to file reports of payroll obligations. In addition, you will still have to file quarterly or annual taxes, income or sales taxes, payroll taxes, and other tax forms according to IRS regulations.
- Send proper notifications to creditors. When you are filing for dissolution, you must send a notification letter to all creditors. In this letter, you must state that your business has filed a statement of Intent to Dissolve or has been dissolved, and you must also include a mailing address for creditors to send any remaining claims. Furthermore, you must provide a deadline for all claims (usually 120 days from the date of notice), along with a list of claims that will be refused if the deadline is passed.
- Settle creditor’s claims. Once you receive the remaining claims from creditors, you should review them and decide which ones to accept or reject. If there are valid claims, you must work to pay them off in full or negotiate a compromise with the creditor. Since your financial situation is likely limited, it is important to use discretion when settling claims.
- Distribute or sell remaining assets. After all claims are settled, you must distribute the remaining assets to company owners according to the percentage they are entitled to. All distributions must be reported to the IRS, including tangible assets (stocks, business equipment, etc.) and intangible assets (goodwill, trademarks, etc.). For businesses that have multiple stock classes, you must follow the corporate bylaws to distribute the remaining assets to shareholders. This is the last step in completely dissolving a business or corporate entity, and it can help ensure you won’t have any legal issues further down the road.
Call Our Marietta Commercial Litigation Attorneys Today at (770) 629-0154
At Busch, Reed, Jones & Leeper, P.C., we offer compassionate and knowledgeable representation to clients facing the complicated process of business dissolution. Our commercial litigation lawyers have experience with the legal aspects of forming and dissolving a business, and we can walk you through the process. Whether you own a small proprietorship or are part of a large corporation, our team can pay close attention to the details of your situation and ensure you meet all the requirements for closing out your company.
Contact our office today for a free consultation with one of our dedicated advocates.