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 Missouri 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 Missouri. 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 report or pay required taxes, this article covers voluntary dissolution by a corporation’s shareholders. Also, while there are special procedures for dissolving corporations that have not yet issued stock or not yet started doing business, and for corporations with two shareholders who each own 50% of the corporation’s stock, those procedures are not covered in this article.
Missouri’s General and Business Corporation Law (“GBCL”) 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 to each shareholder, whether or not entitled to vote, of the proposed meeting to consider dissolution. Unless your articles of incorporation or board of directors requires a greater vote (including a vote by any class of stock or any series of any class), a two-thirds 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 GBCL also allows you to avoid a formal meeting and vote if all shareholders entitled to vote on dissolution provide their written consent. The shareholders must sign a document, known simply as a “consent,” that states the corporation is dissolved. The consent then must be entered in the corporation’s records. Dissolution based on written consent can be more efficient for small businesses where most or all of the voting shareholders are directors—and there is unanimous agreement on dissolution.
Note that dissolution, alone, does not:
After the voting shareholders have approved the dissolution of your corporation, you should file articles of dissolution with Secretary of State (“SOS”). The GBCL 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 able to complete the voluntary dissolution of your corporation.)
The articles of dissolution must provide:
In addition, if voting by classes or series was required, you must also provide the information in the last two listed items, regarding numbers of votes, separately for each class or series entitled to vote.
There is a $25 fee to file the articles. You can file by mail, fax, or in person. An articles of dissolution form is available for download from the SOS website (Form “Corp 46”).
As mentioned above, your business name will become available for use by others one year after 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 GBCL, 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. The GBCL requires that you give notice to known claimants, but giving notice to unknown (potential) claimants is optional.
You must provide known claimants with written notice of your corporation’s dissolution sent via the United States Postal Service. Notice may be sent any time after the dissolution is authorized. The notice must:
For the optional notice to unknown claimants, the GBCL requires that a notice be published in several newspapers (and, if your corporation requests it, by the SOS in electronic format). As with the written notice given to known claimants, there are specific rules for the content of notices given 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 dissolution notices, you should strongly consider getting assistance from a business attorney.
After you have completed winding up your corporation, including properly disposing of all claims and distributing any remaining assets to shareholders, you must file a request for termination with the SOS. The request must include:
A request for termination form (Form “Corp 47”) is available for download from the SOS website.
However, before you can file the request for termination, you must receive a tax clearance certificate from the Department of Revenue (“DOR”). You request this certificate using DOR Form 943 (Request for Tax Clearance). The form is available for download from the SOS website (it’s included when you download the request for termination form) or the DOR website.
There is a $25 fee to file the request for termination. You must include a copy of your tax clearance certificate with your filing. You can file by mail, fax, or in person. Mailed and faxed filings usually take 7-10 business days to process. Filings made in person are usually processed more quickly. If everything regarding the request is in order, the SOS will issue a certificate of termination stating that your corporation no longer exists and cannot be recognized as a separate legal entity.
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.
As mentioned above, you must obtain tax clearance from the DOR when filing for voluntary dissolution. You should complete Form 943 (Request For Tax Clearance) and submit it to the DOR. If all your state tax obligations are paid up, the DOR will issue a tax clearance certificate. You should then submit the certificate with your request for termination.
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.
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.