How to Dissolve a Corporation

How to Dissolve a Corporation

by Rebecca DeSimone, Esq., February 2015

Just as you would file Articles of Incorporation to start your corporate entity and to bring it into existence, so too must you file Articles of Dissolution (also known as a Certificate of Dissolution) to notify the state that you are terminating or dissolving the corporation. Some simple steps on how to dissolve a corporation are outlined below.

How to Close a Corporation

Closing a corporation and winding up business operations is known as "dissolution," and the process requires several steps. Often, the aid of a lawyer or the assistance of a tax professional is helpful. Certainly, you may informally dissolve a company by ceasing all business action; however, this option is not the best (or even the only option), because it opens you to potential lawsuits and later liability. Do not presume that the corporation is ended upon your halting of business operations. Legally speaking, the corporation continues to exist as a business entity regardless of whether or not you continue to conduct business operations. Keep in mind, the State continues to expect the corporation to fulfill and to comply with all legal requirements until the time that the corporation has been dissolved formally.

How Do You Dissolve a Corporation or Obtain a Corporate Dissolution?

Dissolving a corporation successfully takes several key steps. Such requirements may vary across the fifty states. Generally, it is recommended that business owners get legal assistance to file the necessary documents with the proper state agencies.

1. Call a Board Meeting

Once you have decided to close the operations of a corporation, it is recommended that you hold a Board of Director's meeting to formally move to dissolve the corporation. A vote must be taken and the minutes of the meeting must be recorded and retained in the records of the corporation. Once the vote to dissolve has been approved by the Board of Directors, it must also be approved by a majority of the corporation shareholders (if there are shareholders). In certain states, a two-thirds vote is required to constitute a majority of shareholder approval. A majority of shareholders must approve of the intended dissolution and their vote represents their formal approval for dissolution. The precise number of shareholders required to be considered a majority differs in each state. The written agreement seeking dissolution and signed by all owners of the corporation must be completed before a request for dissolution will be approved by the Secretary of State.

2. File a Certificate of Dissolution with the Secretary of State

You can contact the Office of the Secretary of State in the state in which your company is incorporated to obtain the necessary forms required to file an official Certificate of Dissolution with the government agency or you can file the paperwork online. Most states have an Incorporation Bureau or a similarly designated agency that regulates incorporation. It may be called a Corporation Commission or Corporation Agency. You may even find the Incorporation Bureau in your state listed online.

3. Notify the Internal Revenue Service (IRS)

Once you sign and file the dissolution forms with the state agency, you should next notify the Internal Revenue Service (IRS) to inform the agency your intended company dissolution. It is important to pay all taxes due, both to the state and to the federal government in order to obtain a "consent to dissolution" or a "tax clearance." Generally, these forms are required by the Office of the Secretary of State to obtain formal dissolution of a corporation. On the state and local tax return documents, mark the box, "Final Return."

4. Close Accounts and Credit Lines, Cancel Licenses, Etc.

Do not forget to close all bank accounts, credit lines, and service accounts held in your corporate or business name. You will want to terminate all licenses, permits, and/or permits for fictitious name too. Finally, be sure you notify all customers and vendors about your corporation’s dissolution.

If you undertake each step properly, you will successfully close your corporation.

LegalZoom can create and file your corporate dissolution paperwork for you with your state agency. Rush service is also available. If you need to speak to an attorney about dissolving your corporation, try LegalZoom’s business legal plan for a low flat fee.