Dissolution and Winding Up Checklist
Whatever the form of your business, you will need to follow an organized plan for closing your doors. Your plan, in most instances, will have to follow guidelines set forth in your state statutes, the Internal Revenue Code, and state and local tax authority regulations.
The term "dissolution" refers to the systemic closing down of a business entity, while "winding up" refers to the selling of assets and payment of debts prior to closing a business. Dissolution and winding up, as well as other aspects of closing a business, often require the assistance of a legal professional.
Winding Up: Basics
The term "winding up" generally refers to the process of closing down a line of business, whether it's just a product line or an entire business entity. This includes paying or settling all outstanding debts, collecting any money owed by others, selling assets, and basically tying up loose ends. A company that decides to stop pursuing a particular product line, for example, likely will sell all assets related to that product line and make sure all of the financials are closed out. The same is true when entire businesses decide to close down.
Checklist: Dissolution and Winding Up
The following checklist is adopted from the Model Business Corporation Act and is specific to corporations. Not all corporations will be required to follow every procedure, and some state laws may require additional procedures.
If you do not have a corporation, your state laws will probably require many fewer procedures than set forth below.
- Vote for dissolution.
- Contact your commercial insurance agent, notify him/her of the dissolution and determine the best protection against third-party lawsuits that may arise after your dissolve.
- Surrender your Certificate of Authority to transact business.
- File the appropriate forms with the IRS.
- Determine whether you will need to file IRS forms at a later date.
- Notify your secretary of state of the dissolution of your business this may take the form of Articles of Dissolution and/or a Notice of Intent to Dissolve.
- Notify your secretary of state that you are discontinuing the use of an assumed or trade name.
- Obtain and file a good-standing certificate with your state tax authority.
- Publish notice of your business's intent to dissolve.
- Collect your assets.
- Sell or donate property that you are not going to distribute to shareholders/partners.
- Pay the debts you know about.
- Determine whether state statutes require that you notify creditors or the public of your dissolution.
- Distribute the remaining property to your shareholders/partners.
- File an additional notice with your secretary of state stating that all debts have been paid and all assets have been distributed.
- Determine the statutory time limits for third parties to bring suit against you and plan accordingly.
Get Professional Legal Help with the Dissolution and Winding Up Process
As you can see from the preceeding checklist, just shutting down your business is not nearly as simple as it may at first seem. You have to make sure all debts and obligations are taken care of, while filing the proper paperwork and making the necessary announcements and notices. Get help today with your business dissolution by contacting a business and commercial law attorney in your area.
See FindLaw's Closing a Business section for more articles and resources.