Do you want to dissolve a corporation due to debt or other reasons? If YES, here is a complete guide on how to dissolve a corporation legally in 7 simple steps.
All over the world, businesses wind down by simply closing down on operations. However, when a business is dissolved, then it means that it has closed legally. This is with state and federal governments’ consent. Therefore, dissolution means that the business is officially closed .There are diverse reasons for dissolution; it might be as a result of low cash flow, or irreconcilable partner disagreements.
If you have ever wondered if you could always dissolve your corporation if you wanted to, then truth is that you can. However, there are steps that you should take in order to aid the successful exercise. A corporation is regulated as a corporate entity under state law but allowed pass-through taxation with IRS approval.
Hence, dissolving a corporation must be done in agreement with the laws in the state, as well as follow the same set rules you followed in registering it. However, it must be stated that you have got to have a very cogent reason to why you want to dissolve your corporation. This is so that you do not regret down the line why you did so in the first place.
So, that said; if you have been tinkering with how to dissolve your corporation, and do not have an inkling how to go about that, then you may want to consider the following tips.
How to Dissolve a Corporation Legally in 7 Simple Steps
1. Let an Expert Advice You
It is very essential that you get an expert to advise you on some of the steps and actions that you may think to take. This is because your decision to dissolve your corporation may simply be a wrong one- this is especially if what you are going through might just be a type of challenge that can be surpassed. This is why you have got to take time to seek the advice of a lawyer, a business expert, and what have you.
2. Get Shareholders’ Consent
One thing that you have got to consider when you look at dissolving your business is to first of all obtain a vote and verdict to dissolve the corporation from shareholders. In some parts of the world, it is normally required that the managing parties of a corporation be the ones to authorize and initiate a dissolution. When this is done, thereafter the dissolution procedure then commences.
3. Inform Creditors Accordingly
It is very important that you inform your creditors in writing as a formal means of the dissolution of the corporation. In some states the laws require managers of the dissolving corporation to update all creditors with unresolved claims against the corporation of the choice to dissolve. Why is this important? It is needful so that each creditor can identify the rightful claimants of any proceeds from the company assets.
3. File a Certificate of Termination
It is yet very needful that you file a certificate of liquidation with the finance department. You can also go ahead to do the filing with an appropriate corporate regulating agency, in the location where the corporation is registered. If you have been up to date with tax-paying then you should resolve unsettled state income or privilege tax obligations for the last year of existence, as well as for unpaid taxes from prior years. Do note that this is a common requirement to fast track the legal dissolution of your corporation.
4. Get Some Vital Information Handy
The following information is really needed in getting the dissolution of your corporation underway. Things needed include; contact information for creditors, List of Assets, Request for Certificate of Termination, Contact information for corporation owners, Tax records, Incorporation records, as well as IRS forms. Do note that these requirements vary from country to country. As such, it is needful to get all that you are required to.
5. Liquidate the Assets of the Corporation
One of the processes of dissolving your corporation entails that you distribute and sell property and other assets your corporation owns. Thereafter, do ensure that the proceeds from the sale or distribution of property must go toward paying all outstanding debts and obligations which the corporation holds.
It is worthy to note that creditors and members are eligible to receive proceeds from property liquidation. This is also a varying factor in different countries. This means that you have got to check with what applies in your state and adhere to it.
6. File Final tax documents with the IRS
This is one very expedient step that you have got to take if you really want the liquidation process to work out smoothly. It entails that you file some forms with the IRS within 30 days of adopting a corporate resolution to dissolve your corporation.
This requires that you identify information about the Liquidation Corporation comprising; name, incorporation date, as well as address. In addition, filing the final income tax return within 3 months after the dissolution date is also important.
7. Let the Court Be Involved
The final step in the dissolution and the liquidation process of your corporation is incomplete without a court involvement. Therefore, it is vital that a court-supervised dissolution is involved to help wind down the business. This is not to say that these steps as stated earlier cannot be done without a court process. However, it is important that you get a lawyer who may be on ground to help you through all the processes as the corporation gets dissolved.
So, now you see that liquidating and dissolving a corporation isn’t a herculean task as such. You just have to be aware of the processes and you may also consider allowing an expert go through these steps with you for practical comprehension.
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