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 Nevada 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 Nevada. 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 stockholders. Also, while there are streamlined procedures for dissolving corporations where no capital has yet been paid in and the company has not started doing business, those procedures are not covered in this article.
The Nevada statutes covering voluntary dissolution of corporations provide for voluntary dissolution through a stockholder vote at a stockholder meeting. Before the vote, your board of directors must submit a proposal to dissolve to the stockholders. Keep in mind that you are required to give notice to each stockholder, whether or not entitled to vote, of the proposed meeting on dissolution. Nevada’s statutes do not clearly specify if any particular margin of votes is required for the dissolution to be approved. Therefore, if you expect that the voting in favor of dissolution will be less than unanimous, you should consult with a business attorney for guidance. In any case, make sure to properly record both the board’s proposal and the stockholders’ votes.
Alternatively, unless your articles of incorporation or bylaws provide otherwise, you can dissolve by getting the written consent of the same number of shares as would otherwise be needed at a stockholder meeting. If you use this method, no stockholder meeting is necessary.
(Note: if your corporation has not issued stock, dissolution can be approved by the directors without the need for any action by stockholders.)
After dissolving your corporation, you must file a certificate of dissolution with the Secretary of State (“SOS”). To complete the certificate of dissolution, you must provide:
You may also specify a date up to 90 days after the certificate is filed for the dissolution to take effect. The certificate must be signed by a corporate officer.
There is a $100 fee to file the certificate. An certificate of dissolution form is available for download from the SOS website. Along with the completed certificate you should include a completed Customer Order Instructions form, also available from the SOS website. Your filing usually will be processed within one week. Various forms of expedited processing, which you can request on your Customer Order Instructions form, are available for additional fees. You are entitled to one free copy of the filed certificate stamped by the SOS, but you must request it as part of your filing.
Be aware that your business name will become available for use by others after dissolution.
Also, keep in mind that according to Nevada’s statutes, dissolution, alone, “does not impair any remedy or cause of action available to or against it or its directors, officers or shareholders arising before its dissolution and commenced within 2 years after the date of the dissolution.” In other words, directors, officers, or shareholders may still be legally liable for certain claims for up to two years 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 Nevada’s statutes, key winding up tasks include:
The last two listed items bear emphasis. Your corporation’s first obligation is to pay or make adequate provision to pay its liabilities and obligations. This includes paying all business taxes and creditors. Only then may the corporation distribute remaining assets, if any, to stockholders.
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 stockholders for federal tax purposes. Only the stockholders, 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.
Nevada 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.
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.