Sometimes a dissolution or liquidation is triggered voluntarily, as a result of management gridlock. Other times, it is sparked by an involuntary life-changing event for a key principal in the company. Either way, we want our clients to be prepared for the events that set dissolutions and liquidations in motion. Planning for such events in advance is crucial to ensure business continuity and order during this intensive and challenging process.
Are you ready to dissolve and liquidate your company? Throughout the transition, there are many important steps that you must take to officially dissolve the company. For example, the process typically includes:
- Corporation or LLC action: Your company owners or shareholders must approve your decision to dissolve the business. You may need to comply with requirements detailed in your bylaws or operating agreement, though the details vary depending on the type of business entity you have (corporation, LLC, etc.) and any controlling procedures in company governance documents.
- Filing paperwork with state offices: Once the action has been approved, you must file paperwork in the state in which your business was incorporated as well as any states in which you were qualified to transact business. This process varies by state and carries penalties for non-compliance.
- Tax reporting: Your business operations may end immediately, but your tax obligations do not. You will need to file federal, state, and local tax forms and formally close your business with the IRS.
- Creditor notification: You must send all of your creditors a letter to notify them of your company’s dissolution. In addition, you will need to provide them with a mailing address so that they know where to send their claims. Failure to follow proper notice procedures may personally expose company principals and shareholders to creditor claims.
- Claim liquidation: You can accept or reject your creditors’ claims. If you accept, you must pay the claim using the payment arrangement agreed upon; however, if you reject it, you must do so in writing and follow additional procedures for liquidation. Consult with our attorneys to be sure that you are following all legal requirements and state statutes to avoid personal liability for creditor claims.
- Asset distribution: Finally, you must distribute the company’s remaining assets to company owners based on ownership interest percentages. For example, if you own 60% of the company, you may be able to claim 60% of the remaining assets after all debts and claims are paid including taxes and contingent liabilities. Be sure to report any personal distributions received to the IRS.
Legal issues often arise during the dissolution and liquidation process. To ensure that you are prepared, the attorneys at Carnahan, Evans, Cantwell & Brown can assist you through this complicated process. Our thorough knowledge of Missouri’s corporate and business laws provides the guidance and direction our clients need to navigate the turbulent waters of dissolution and liquidation.
When dissolving events occur, our attorneys react quickly to respond to pressing issues. This accelerates dissolution, minimizing losses and maximizing opportunities for the reduction of risk and liability exposure for our clients. In addition, we are committed to providing the timely guidance our clients need in a dissolution or liquidation event. We want our clients to meet their expectations as well as their goals so they can quickly pursue new opportunities and ventures.