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Dissolution: How to Properly Close a Company

Published on Jan 9, 2012

Summary

Read 'Dissolution: How to Properly Close a Company' at 'Time to Start Up,' the small business blog by BizFilings.
Dissolution-How-to-Properly-Close-a-CompanySmall business owners don’t typically open up their business with the intention of closing it down. In reality, it happens. Anyone who’s closed a business knows the emotional baggage that goes along with it — including feeling like a failure. But it's important to remember that more often than not successful endeavors and successful businesses are the result of one or more failures. From Thomas Edison, to Steve Jobs, failure played an integral role in their ultimate success. Learning what went wrong, as well as taking note on what worked well, is a recipe for success. But before you move on to your next endeavor, you’ve got to get your current company closed properly. Walking away without taking the right steps to dissolve your company could cost you money — and it could hurt your reputation in the business world (some states make this type of information public). Although it may be overwhelming now, correctly dissolving your company is something you’ll be glad you did down the road. To follow is an overview of the steps a business needs to take to dissolve their company. For more details, visit our dissolution article at BizFilings.com. Step 1: Corporation or LLC action Company owners must approve the dissolution of the business. With corporations, the shareholders must approve the action; with limited liability companies (LLCs), members grant approval. Step 2: Filing the Certificate of Dissolution with the state After shareholders or members have voted for the dissolution, paperwork must be filed with the state in which the business was incorporated. If the company qualified to transact business in other states, paperwork must be filed in those states, too. Step 3: Filing federal, state, and local tax forms Although you’re ending operations, your tax obligations do not immediately cease. You must formalize the business closing with the IRS as well as your state and local taxing agencies. Step 4: Notifying creditors your business is ending You must notify all of your company's creditors by mail, and explain:
  • That your corporation or LLC has been dissolved or has filed the statement of intent to dissolve
  • The mailing address to which creditors must send their claim(s)
  • A list of the information that should be included in the claim
  • The deadline for submitting claims (often 120 days from the date of the notice)
  • A statement that claims will be barred if not received by the deadline
Step 5: Settling creditors' claims Creditor claims can be accepted or rejected by your company. Accepted claims must be paid or satisfactory arrangements made with creditors for repayment. Step 6: Distribution of remaining assets After paying claims, remaining assets may be distributed to company owners in proportion to the share of ownership. Just like Thomas Edison, who failed at creating a working light bulb over 10,000 times, we have to keep trying and learning until we get it right. Until then, don't give up.

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