The termination of a company or winding up your business is called corporate or LLC Dissolution. Corporate termination is a burdensome and tiring task for business owners because they have invested lots of hard work and capital in their merchandise and everyone wants their business to grow and prosper, but sometimes dissolution of business is far better than bearing negative revenue and detrimental reverberation each year.
Reasons for business dissolution:
There can be a number of causes including
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bankruptcy,
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change of mind,
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retirement
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business is not commercially successful or cost effective
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does not generates enough revenue
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lack of time to manage properly
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If the market value has reduced with time or any other genuine reason.
However business dissolution not only requires the approval of owner, there are some legal procedures which must be followed. Since initiating a business requires legal authorization by the state so its dissolution also requires a legal procedure to be followed and an official certificate from the state. For some small business owners, a time comes when they must end operations and dissolve their business to escape taxation and penalties along with detrimental business revenue. Its a multistep process which is tough and stressful and requires a legal procedure to be followed.
What will happen if you don’t dissolute your business formally?
There is a proper procedure which needs to be followed to officially profligate your business otherwise you will be in some serious trouble. You will be subjected to taxes and interest from the concerned authorities of the state and failure to do so will lead to heavy fines and penalties.
Legal procedure
Following are some typical actions that need to be followed for corporate dissolution at state level once you have made your decision:
Approval of all stakeholders
For corporate dissolution, approval of all the major stake holders of the corporation is really important. After gaining vote of confidence you can move on to the next step. If you have employees, you need to address their concerns as well.
Submit an application in concerned department
You must inform the concerned authorities in the year you want to end your business .The process for filing the Certificate of Dissolution is different in each state. Some states require filing documents before notifying creditors and resolving claims; others require filing after that process, so you need to follow the criteria set by your state for business dissolution. If your firm has legal presence in other states, applications must be submitted in the concerned departments of those states as well.
Required documents:
You need to produce a tax clearance certificate of your company before filing an application for dissolution so any back-taxes must be cleared beforehand. Final wage and withholding information must be issued to the employees. You also need to submit final capital’s profit and loss report, the division of shares of the stakeholders/partners, pension/benefit plan of employees, final tip income and allocated tips information return along with final state tax deposits. You also need to produce payment information to sub-contractors and final state tax deposits. After submitting all these documents, your application will be submitted and state will follow its legal procedure.
Your corporation will be formally withdrawn on the date your application is approved by the state. The date of dissolution is generally the date your application is signed by the state’s attorney.
Signing of dissolution certificate
The certificate of dissolution must be filed by the attorney, director or any other legally authorized officer. The name and designation of the signing authority must be clearly mentioned on it.
You can get additional help from legally registered agents online or from the secretary of state’s office.
