5 Steps To Dissolve A Company Properly To Limit Your Liability

Sometimes, business does not go as planned. Even the best ideas may not translate into successful business endeavors. Going out of business is unfortunate. But, it is also a fact of life. In this case, you will definitely need to dissolve a business in order to open yourself up to new business opportunities that will be more successful and more lucrative. Just like there is a mortgage checklist for home buyers, there is a dissolution checklist for business owners like you. Find out how to dissolve a company below.

Get Approval

Depending on what type of business organizational structure you operate, you may need to get permission for business dissolution. If you own a corporation, shareholders must approve the dissolution. If you operate an LLC, your members must grant their approval. Other small businesses will not probably not require this step, as owners and other stakeholders are more involved in the day-to-day operations of the business. Otherwise, make sure your get permission to dissolve a company from the board of directors, shareholders, partners or other appropriate parties.

Stop Operations

This should go without saying but just in case, make sure you stop all business operations before you file for business dissolution. If you have employees, make sure to let them go before you file paperwork. Finish up any last minute sales you may have in the pipeline. Then, you can begin to take the official steps to dissolve your business and start to enjoy life again.

File Certificate Of Dissolution

After you have received approval to dissolve a business and have stopped all operations, you must file a certificate of dissolution. This paperwork will need to be submitted to the Secretary of State in the state your business operates in. You can contact their office to obtain the forms necessary to dissolve your business. Or, in some states, you may be able to file a certificate of dissolution online. Whichever way you do it, this is the official paperwork you need to file in order to dissolve a business.

Alert The IRS

You will also need to alert the IRS to your business dissolution. You cannot dissolve a company without letting the IRS know. Some businesses will need to file the IRS 966 form. Form 966 is used for corporate dissolution or liquidation. LLCs, however, do not require this form. If you are trying to dissolve an LLC, all you have to do is check off the “final return” box on your last 1065 form. No matter what type of business you operate, make sure you inform the IRS that you are dissolving a company.

Notify Creditors

The final step in dissolving your company is notifying your creditors. Make sure to erach out to creditors to inform them of your corporation dissolution. This step is optional. However, you will certainly want to do it for liability’s sake. It is just good business. This can be done by publishing a notice of dissolution in a local newspaper once a week for two consecutive weeks. But, you must also inform creditors via written notice to their address. If you choose to limit your liability, make sure you notify creditors of your business dissolution.

Closing a business is a very tough time for entrepreneurs. You want to make sure it is as simple a process as possible. Follow the steps above to dissolve a company. This way, you can be sure you have crossed your t’s and dotted your i’s to limit your liability. Then, you will be free to pursue better business opportunities down the line.

Photo from https://www.shutterstock.com/video/clip-4588835-stock-footage-going-out-of-business-closed-sign-on-window.html

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