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Dissolving a Business: Terms You Should Know

Whether you're planning to sell your business to another entity or need to shut it down for financial reasons, the dissolution of a business is actually quite complicated in many respects. You will need to tie up loose ends with creditors, customers, partners, suppliers, and other stakeholders, while making sure you provide the proper notices. But before you embark on this process, it's important to get familiar with the terms related to dissolving a business.

Below is a glossary of terms associated with dissolving a business.

Administrative Dissolution. Dissolution of a corporation by the state, usually by the Secretary of State, for such things as failing to pay taxes, failing to deliver an annual report, or operating without a registered agent

Articles of dissolution. The document that a corporation files with the secretary of state that causes the dissolution of the corporation.

Assumed name/trade name A fictitious name used by a business.

Certificate of assumed name, trade name, or fictitious name. A certificate granted by a state authority (usually the secretary of state) that allows you to transact business under a name other than your own.

Certificate of authority. A certificate granted by a state authority (usually the secretary of state) that allows a foreign corporation to conduct business

Complaint. A legal document that is filed with the court by a plaintiff generally causing the commencement of a lawsuit.

Dissolution. Termination of a business's existence.

Indemnity. Shifting the responsibility for satisfying losses resulting from liability from one party to another.

Involuntary dissolution. A dissolution that is not initiated by corporate shareholders

Limited liability company. A business entity that offers limited liability to its members without being a corporation

Liability insurance. A type of commercial insurance that protects a business for injuries it causes to third parties.

Liquidation. Collecting assets, converting assets to money, paying debts, and distributing the surplus while in the process of closing a business.

Notice of intent to dissolve. A document informing the secretary of state that your corporation will be dissolving.

Partnership. Two or more people who carry on a business for profit pursuant to an agreement that money, labor, skills and profits will be utilized and divided in predetermined proportions.

Partnership agreement. A contract that partners enter into that sets up the terms of their partnership.

Product liability lawsuit. A suit brought by a person who has been injured by a product as opposed to being injured by another individual.

Settlement. When parties in a lawsuit agree to end the suit in exchange for money or something else of value to either party.

Sole proprietorship. Ownership of a business by one person who operates the business as an extension of himself or herself.

Voluntary dissolution. A dissolution that is approved by the directors and shareholders of a corporation, partners in a partnership or members in a limited liability company.

Winding up. Liquidating a business.

Confused? Get Help Dissolving Your Business from a Legal Professional

Whether you're dissolving your business or about to embark on a new path, you may need to consult with an attorney first. While the cost of hiring a lawyer may seem too high at times, legal professionals typically save your business time and money in the long run. Find the right business and commercial law attorney near you.

See FindLaw's Closing a Business section for more articles and resources.

Next Steps
Contact a qualified business attorney to help you tie up all
loose ends when closing your business.
(e.g., Chicago, IL or 60611)

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