Why You May Need a Lawyer to Help You Dissolve a Business
Posted on: 28 December 2020
Bringing a business to an end often entails several legalities. Even if you're sure you're prepared to tackle the situation, you'll likely need the help of someone well-versed in business transaction law. Let's examine why that is and how you can choose the right law firm to assist you.
Dealing with the Big Picture
End-of-life work on a company falls under the heading of business transaction law services. This is because you typically have to unwind many of the transactions that brought the business into being. You'll likely have to address the concerns of various stakeholders, and you'll need to do so within the limitations of both your company's structure and the law.
Authority
The first order of business is confirming that you have the authority to dissolve the organization. Have an attorney check the company's charter and bylaws to verify who has a say in the matter and how to convene them to discuss the process. You may also need to conduct a vote to set the dissolution process in motion.
Outstanding Debts and Taxes
It's a good idea to conduct a full accounting of what remaining obligations are hanging out there. Creditors and the government may both have enforceable claims on your company's assets, and it's best to settle these in a structured fashion. You should send notices to all potential claimants so they can take appropriate actions. Whenever possible, you'll need to pay off tax bills. If you are unable to pay the taxes in full, it is best to notify the IRS and any state and local agencies. They can explain how to address remaining taxes when a company ceases operations. All taxes must be settled before you can officially dissolve the organization. Likewise, your last return should be marked as your final one. If necessary, you may need to wind them down through the bankruptcy system. Bear in mind you may have to maintain a skeletal version of the business until this process concludes or the creditors take control.
Notice
You will also likely have to send a formal notification of the dissolution to the government of the state where your corporation resides. This notice usually goes to the Secretary of State's office.
A business should provide details about why the dissolution is happening. This should indicate whether the dissolution came because of a shareholder vote, government action, or court order. Your corporation's license will then go into an inactive status.
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