For some corporations, a time comes when the people who own and run things voluntarily decide to close the business. If you’ve reached that point with your New Mexico corporation, you’ll need to take care of multiple tasks—including what is called dissolving and winding up your business.
Note: Many New Mexico corporation filings, such as a statement of intent to dissolve and articles of dissolution, were long handled through the Corporations Bureau of the Public Regulation Commission. However, effective July 1, 2013, these filings are now handled through the Business Services Division of the Secretary of State (“SOS”). The mailing address for corporate filings is now:
Office of the New Mexico Secretary of State
Attn: Corporations Bureau
325 Don Gaspar – Suite 300
Santa Fe, New Mexico 87501
Your corporation is registered with the State of New Mexico. Officially ending its existence as a state-registered business entity, and putting it beyond the reach of creditors and other claimants, begins with a formal process called “dissolution.” While a corporation may be involuntarily dissolved through a court decree, or for administrative reasons such as failing to file required reports, this article only covers voluntary dissolution by a corporation’s shareholders. Also, while there are streamlined procedures for dissolving corporations that have not yet issued stock or started doing business, those procedures are not covered in this article.
New Mexico’s Business Corporation Act (“BCA”) provides two main methods to voluntary dissolve your corporation:
Under the first method, your board of directors must adopt a resolution to dissolve and submit it to the shareholders. Then there must be a formal shareholder meeting to vote on the resolution. Keep in mind that in most cases you are required to give at least ten days advance notice to each shareholder entitled to vote of the proposed meeting on dissolution. Generally speaking, dissolution must be approved by a majority of all shares entitled to vote on the matter. If you have different classes of shares, then generally a majority of each class of shares must approve the dissolution. If you use this method to dissolve your corporation, you should review your articles of incorporation and bylaws for any special provisions regarding dissolution that may differ from the rules under the BCA. Also, make sure to properly record both the board’s resolution and the shareholders’ votes.
Under the second method, a document, known simply as a “consent,” must be signed by all shareholders. You may want to consider getting assistance from a lawyer in preparing the consent. This method can be more efficient for small businesses where most or all of the corporation directors are also the shareholders—and there is unanimous agreement on dissolution.
Regardless of whether you dissolve through a shareholder vote or through unanimous written consent, you must file a statement of intent to dissolve with the SOS after the dissolution.
If you dissolve via a board resolution and shareholder vote, your statement of intent to dissolve must contain:
If you dissolve via written consent, your statement of intent to dissolve must contain:
There is a $50 fee to file the statement. Additional fees may apply for additional services, such as certified copies. You should file both the original of the statement and a copy. Blank forms for each type of statement of intent to dissolve are available for download from the SOS.
Following dissolution, your corporation continues to exist only for the purpose of taking care of certain final matters that, collectively, are known as “winding up” the company. It may be appropriate to designate one or more officers and/or directors to handle the winding up.
Under the BCA, key winding up tasks include:
Regarding the last two items, it should be emphasized that your corporation’s first obligation is to discharge liabilities and obligations. This includes paying all business taxes and creditors. Only then may the corporation distribute remaining assets, if any, to shareholders.
One other key task is giving notice to creditors and other claimants of your corporation’s dissolution. Under the BCA, after you file your statement of intent to dissolve, you must “immediately” mail notice of your dissolution to each of your known creditors. You should consider working with an attorney to ensure that you correctly fulfill the BCA’s notice requirements.
Before you can file articles of dissolution (see below), New Mexico requires that you obtain clearances from three different state agencies, as follows:
For federal tax purposes, check the “final return” box on your IRS Form 1120 (for traditional corporations) or IRS Form 1120S (for S corporations)
After you have finished winding up your corporation and obtained the necessary clearances from state agencies, you must file an original articles of dissolution and a copy with the SOS. The articles of dissolution must contain the following information:
The SOS has a blank articles of dissolution form available for download. There is a $50 fee to file the articles.
Be aware that your business name will become available for use by others after your articles of dissolution are processed.
An S corporation is a corporation that has filed an election with the IRS to have business income, losses, deductions, and credits pass through to individual shareholders for federal tax purposes. Only the shareholders, and not the corporation, pay federal taxes on income from the business. Potential tax issues aside, the process for dissolving and winding up an S corporation is generally the same as dissolving and winding up a traditional corporation.
Is your corporation registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
For information on dissolving and winding up corporations formed in other states, check Nolo’s 50-state series on dissolving corporations.
Final Note: Dissolving and winding up your corporation is only one piece of the process of closing your business. For further, general guidance on many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.