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 Georgia corporation, you'll need to take care of multiple tasks—including what is called dissolving and winding up your business.
Your corporation is registered with the State of Georgia. 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 an annual registration or required state tax returns, this article covers voluntary dissolution by a corporation's shareholders. Also, while there are streamlined procedures for dissolving corporations that have not yet issued shares or not yet started doing business, those procedures are not covered in this article.
Georgia's Business Corporation Code ("BCC") provides for voluntary dissolution through a shareholder vote at a shareholder meeting. Before the vote, your board of directors must submit a proposal to dissolve to the shareholders. You are required to give at least ten days advance notice of the shareholder meeting to all shareholders entitled to vote on dissolution. Unless your articles of incorporation or board of directors require a greater vote or a vote by voting groups, a majority of all votes entitled to be cast must approve the dissolution. If you use this method, make sure to properly record both the board's proposal and the shareholders' votes.
The BCC also allows you to avoid a formal shareholder vote at a meeting if shareholders entitled to vote on dissolution provide their written consent. There are two ways written consent can operate to approve dissolution. First, dissolution is approved if all shareholders entitled to vote provide their consent. Second, if permitted by your articles of incorporation, dissolution may be approved by the consent of only the simple majority of shares otherwise required under the BCC when shareholders vote at a shareholder meeting. Regardless of whether all shareholders or only a majority must provide consent, the required number of shareholders must sign a document, known simply as a "consent," that states the corporation is dissolved. The consent then must be properly entered in the corporation's records. You must give notice to nonvoting shareholders not more than ten days after you have collected the written consents needed to dissolve. In addition, if you do not have unanimous consent of the voting shareholders, you must also provide notice of the action to dissolve to all voting shareholders who did not consent; you must give this notice within ten days after you have collected enough written consents to dissolve. Dissolution based on written consent can be more efficient for small businesses where most or all of the shareholders are directors—and there is either unanimous agreement, or, where permitted, majority agreement, among voting shareholders on dissolution.
After shareholders approve the dissolution of your corporation, you must file a notice of intent to dissolve with the Corporations Division of the Secretary of State ("SOS"). The notice must contain the following items:
In filing your notice of intent to dissolve, you must also include a statement that you have made a request for publication of a notice that your corporation intends to dissolve. This statement may be included as part of your notice or it may be included in a separate letter submitted with the notice. (The publication requirement is discussed in more detail below.)
A blank form for the notice of intent to dissolve (Form CD 410) is available for download from the SOS website. If you use the SOS form—which is recommended—you will find it includes the required statement about publication: "The undersigned does hereby certify that a request for publication of a notice of intent of to voluntarily dissolve the corporation along with publication of fee of $40.00 has been forwarded to the official organ of the county of the registered office as required by O.G.C.A. §14-2-1403.1(b)."
There is no fee to file the notice with the SOS.
You are required to publish a notice of intent to dissolve. More specifically, within one business day of filing your notice with the SOS, you must mail or deliver a request to publish notice of dissolution to a newspaper that is an "official organ" of, or is of general circulation in, the county where your corporation's registered office is located. The recommended minimum text of the notice to be published is included within the BCA:
"NOTICE OF INTENT TO VOLUNTARILY DISSOLVE A CORPORATION Notice is given that a notice of intent to dissolve ______________________ (name of corporation), a Georgia corporation with its registered office at _______________________ (address of registered office), has been delivered to the Secretary of State for filing in accordance with the Georgia Business Corporation Code."
When you submit your request you must include a statutory payment of $40—check, draft, or money order—to cover the cost of publication. The notice should run at least once a week for at least two consecutive weeks beginning within ten days after the newspaper receives the notice.
(As mentioned above, the SOS's form for the notice of intent to dissolve requires you to certify that you have requested publication. However, the SOS is not able to check for publication, and the BCA states that dissolution is not invalidated if a corporation fails to publish the notice.)
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 BCC, key winding up tasks include:
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.
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.
Note: This notice is separate from the notice of intent to dissolve discussed above.
Under the BCC, one way to give notice is by sending a written document directly to known claimants after you have filed your notice of intent to dissolve. Proper written notice must:
You also may give notice to unknown (potential) claimants by publishing in a newspaper. As with sending direct notice to known claimants, there are specific rules for giving notice through publication. Generally speaking, claimants have two years after the date of newspaper publication to bring a claim.
Some of the rules for giving notice and responding to claims can be hard to understand. Therefore, when dealing with giving claimants notice, you should strongly consider getting assistance from a business attorney.
After you have finished winding up your corporation, including paying or discharging, or making adequate provision to pay or discharge, all known debts, liabilities, and obligations, you should file articles of dissolution with the SOS. The BCC does not strictly require you to file this document, instead stating that a corporation "may" dissolve by filing the articles. However, for various reasons, including limiting liability and terminating various filing requirements, filing articles of dissolution is generally the best practice. (In short, if you don't file articles of dissolution, you won't be completing the voluntary dissolution of your corporation.)
Under the BCC, the articles of dissolution must contain the following items:
An articles of dissolution form (Form CD 412) is available for download from the SOS website. There is no fee to file the articles. You must file both the original signed articles and one copy. Your filing usually will be processed in 7-10 days. Expedited processing is available for a $100 fee. Note that the SOS will not allow you to dissolve your corporation unless you are current with your annual registrations and in active status with the SOS.
For simpler dissolutions, you may find it makes sense to file your notice of intent to dissolve and your articles of dissolution at the same time.
Finally, be aware that your business name will become available for use by others after dissolution.
Georgia does not require that you obtain tax clearance before allowing you to file to dissolve to your corporation. (You are required to file a final state corporation tax return. On the return, check the "final return" box. The return is due on or before the 15th day of the third month after the date of dissolution.)
For federal tax purposes, check the "final return" box on your IRS Form 1120 (for traditional corporations) or IRS Form 1120S (for S corporations).
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.
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.
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.