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 Oklahoma corporation, you’ll need to take care of multiple tasks—including what is called dissolving and winding up your business.
Dissolving the Corporation
Your corporation is registered with the State of Oklahoma. 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, this article 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, as well as special dissolution procedures for joint venture corporations with precisely two shareholders, those procedures are not covered in this article.
Oklahoma’s General Corporation Act (“GCA”) provides for voluntary dissolution through either of two methods:
- action by the board of directors followed by a shareholder vote; or
- written consent of all shareholders.
Under the first method, your board of directors must adopt a resolution to dissolve and submit that resolution to the shareholders. The shareholders then must vote on the resolution at a shareholder meeting. You are required to give advance notice of the meeting to each shareholder entitled to vote on the resolution. At the shareholder meeting, a majority of the outstanding stock of the corporation must approve the dissolution. You should make sure to properly record both the board’s resolution and the shareholders’ votes.
Under the second method, you will need signatures from all shareholders on a consent form. If you use this method, there is no requirement for separate action by the board of directors. This method can be more efficient for small businesses where all or most of the shareholders are also directors, and where there is unanimous agreement regarding dissolution.
Certificate of Dissolution
After dissolving your corporation, you must file a certificate of dissolution with the Secretary of State (“SOS”). Under the GCL, the certificate of dissolution must contain:
- the name of your corporation
- the date dissolution was authorized
- a statement either that (a) the dissolution has been authorized by the board of directors and shareholders of the corporation in accordance with the appropriate sections of the GCL, or (b) the dissolution has been authorized by all of the shareholders of the corporation entitled to vote on a dissolution in accordance with the appropriate section of the GCL; and
- the names and addresses of the corporation’s directors and officers.
The SOS has a blank certificate of dissolution form available for download from the SOS website. In addition to the foregoing listed items, the SOS form also requires you to provide your corporation’s date of incorporation and name and street address of your corporation’s registered agent.
There is a $50 fee to file the certificate. You can file your dissolution by mail, in person, or online. To file online you must have registered an online account with the SOS. Your filing usually will be processed in one week. Expedited processing is available for an additional fee.
Be aware that your business name will become available for use by others after dissolution.
Also, note that under the GCA, dissolution, alone, does not terminate any legal or similar action pending by or against the corporation at the time of dissolution, or for a period of three years after the date of dissolution.
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 GCA, key winding up tasks include:
- gradually settling and closing the business
- prosecuting and defending lawsuits
- disposing of and conveying corporation property
- discharging the corporation’s liabilities; and
- distributing any remaining assets to shareholders.
Regarding the last two listed items, be aware that your corporation’s first obligation is to discharge liabilities. This includes paying all business taxes and creditors. Only then may the corporation distribute remaining assets to shareholders.
Notice to Creditors and Other Claimants
One other key task is giving notice to creditors and other claimants of your corporation’s dissolution. Giving notice is optional. However, doing so will help limit your liability and also allow you to more safely make final distributions to shareholders.
Under the GCA, giving notice requires both sending a written document directly to known claimants and publishing the same notice in a newspaper for two consecutive weeks. The notice must state:
- that all claims must be presented in writing and must contain sufficient information reasonably to inform the corporation or successor entity of the identity of the claimant and the substance of the claim
- the mailing address to which a claim must be sent
- the date by which a claim must be received by the corporation or successor entity, which date cannot be less than sixty (60) days from the date of the notice
- that the claim will be barred if not received by the deadline stated in the notice
- that the corporation or a successor entity may make distributions to other claimants and the corporation's shareholders or persons interested as having been such without further notice to the claimant; and
- the aggregate amount, on an annual basis, of all distributions made by the corporation to its shareholders for each of the three years prior to the date the corporation dissolved.
There are many additional rules regarding both the notice you send directly to known claimants and the notice you publish in a newspaper. Some of these rules, as well as the rules for responding to claims, can be hard to understand. Therefore, if you choose to give claimants notice, you should strongly consider getting assistance from a business attorney.
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.
Oklahoma does not require that you obtain tax clearance before dissolving your corporation.
For federal tax purposes, check the “final return” box on your IRS Form 1120 (for traditional corporations) or IRS Form 1120S (for S corporations).
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.
You can find additional information, such as forms, mailing addresses, and filing fees, on the SOS website.
For information on dissolving and winding up corporations formed in other states, check Nolo’s 50-state series on dissolving corporations. For information on dissolving and winding up a non-profit corporation, look at Nolo’s 50-state series on dissolving non-profit 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.