A lawyer for business dissolution assists company owners in dissolving corporations, efficiently keeping a close watch on preventing regulators or other interested people from returning to the owners after dissolution for any persisting issues. In addition, a lawyer for business dissolution can also help company owners with the following:
Cancelling State and National Registrations
If you have incorporated your business as a company or an LLC (Limited Liability Company), you would have registered your organization with the state. In addition, you also maintain an enduring obligation to document annual reports with the state. However, you might have to pay penalties if you fail to furnish these records.
That is why it is necessary to follow the required measures to inform the state that the business is dissolving. Moreover, many companies provide such notices by filling out a legal form known as a Certificate of Termination. It notifies the government that your business is dissolved and is no longer accountable for filing annual reports and taxes.
Also, the IRS (Internal Revenue Service) has policies for notifying it of your business dissolution, including filing a Report of Corporate Dissolution. Since this process can be complicated, it is better to seek help from an attorney who can help you perform all these processes seamlessly.
Compensating Owners and Settling Debts
Under your functional or shareholder contract, you will have responsibilities to pay company owners after settling all incurred debts. Also, to the extent it is feasible, the company should pay all valid debts and avoid further accountability among the business proprietors. However, if any returns are available after debt settlement, the management should divide the profits according to the working contract or shareholder deal.
Furthermore, dissolution is usually a hectic period for a company and can lead to errors in the allocation of settlement among the owners. Therefore, it is important to get it right to prevent any compensation-related accountability after dissolution. A lawyer for business dissolution can get you on the right course to ensure allocations happen according to the contracts.
What Exactly is Business Dissolution?
The word business dissolution refers to the closing of an organization. In addition, business dissolution is a proper closure of a corporation with the state in which the company or partnership firm is registered. It is essential to remember that there are numerous measures before a business can be lawfully dissolved. Business dissolution ensures that you no longer run the company and subsequently claim that your corporation is closed.
Furthermore, if a small business has created a company or a limited liability partnership, it must register articles of business dissolution with its state to thoroughly terminate its operations. Articles of dissolution inform the regional Secretary of State that a company is formally shut. In addition, business dissolution happens for numerous reasons, some of which comprise the following:
- Financial losses
- No time or intention to keep the business running
- Change of occupation
Besides, the state may compel the business to dissolve if it does not pay the required taxes, which is known as administrative dissolution. Administrative dissolution can also happen when you do not file an annual report on time or register it.
Understanding the Legal Issues Arising During Business Dissolution
Generally, the most typical legal problem during business dissolution is settling company debts and obligations. For instance, if the business is being dissolved due to the company’s inability to generate revenue, that implies that the company’s obligations and debt overshadow company assets. Therefore, the business must pay the debt and fulfill other obligations before dissolution.
In addition, another prevalent legal problem during business dissolution is not fulfilling any remaining service or sales contracts. For instance, a company may have contracts to buy specific goods or services from another company that needs to be completed or withdrawn. Eventually, another statutory issue that may occur during the business dissolution is handling the split of business assets.
In many circumstances, a business may dissolve after years of being profitable. If that is the situation, the company owner(s) will have to decide whether to trade the company immediately or dissolve the company and split the company assets amongst the owner(s). Typically, the shareholder agreements and business formation summarize how a company’s assets are split upon dissolution. It is essential to note that dissolving the business and distributing assets will eventually depend on the kind of business initially created.
For instance, a sole proprietorship may dissolve when the owner shuts the shop. The assets would move towards settling liabilities and debts, with the excess assets returning to the proprietor. Likewise, in a partnership, the firm may dissolve when the partners decide the firm would dissolve or one of the partners departs. Again, the partnership contract will summarize how assets are split upon the dissolution. On the other hand, companies generally may only dissolve upon a bulk vote of the shareholders approving the dissolution of the company. The company formation papers, along with the shareholder contract, will decide how assets are split upon the dissolution of a company.
- Articles of Dissolution: Records registered with officers in the state(s) in which a business operates to declare the purpose of the business to dissolve.
- Certificate of Authority: A paper administered by state officers presenting a foreign entity the freedom to work within that state.
- Notice of Intention to Dissolve: Notification sent to officials informing them of your business’s intent to dissolve.
- Settlement: A contract between the people concerned in a suit that stops lawful action in exchange for the contracting parties obtaining financial or other benefits, usually embarked in negotiation to avoid mortification or expenditure at trial.
- Certificate of Trade Name, Fictitious Name, or Assumed Name: Permission from state authorities approving the enrollment of a name under which the business will run and that distinguishes it from the legal title of the owner(s) of the business.
In a nutshell, if you plan to dissolve your business, you should immediately consult our professional and knowledgeable lawyer for business dissolution at ContractsCounsel. A skilled and local business lawyer can assist you in deciding what business dissolution measures you need to exercise and help you file all required forms. In addition, a lawyer can also represent you in the tribunal if any legal problems arise.