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 York 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 New York. 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 order, or through "dissolution by proclamation" for failing to file franchise tax returns, this article only covers voluntary dissolution by a corporation's shareholders.
New York's Business Corporation Act ("BCA") provides for voluntary dissolution through three different methods:
Dissolutions by shareholder vote occur at a formal shareholder meeting. Generally, before the meeting and vote, your board of directors must adopt a proposal to dissolve and submit it to the shareholders. Keep in mind that you are required to give at least ten days advance notice to each shareholder of the proposed meeting on dissolution. Dissolution typically must be approved by a majority of all shares entitled to vote on the matter. However, depending on the effective date of your certificate of incorporation and of any amendments to that certificate, a two-thirds majority of all voting shares may be required to approve dissolution. You should carefully review the dissolution provisions of your certificate of incorporation, and, as necessary, get assistance from a competent business attorney. If you use this method to dissolve your corporation, make sure to properly record both the board's resolution and the shareholders' votes.
The BCA also allows you to avoid a formal vote at a shareholder meeting if all shareholders entitled to vote on dissolution provide their written consent. In addition, your certificate of incorporation may provide that you can dissolve by getting the written consent of the same number of shares as would otherwise be needed at a meeting. In the latter case, unless your certificate of incorporation requires a greater vote, to dissolve you would need to get written consent from either a simple majority or two-thirds majority, depending on your date of incorporation. In either case—getting consent from all voting shares or from only a certain majority of shares—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 records. Dissolution based on written consent can be more efficient for small businesses where most or all of the shareholders are directors—and there is general agreement on dissolution. If you use this method, you must give any nonconsenting shareholders who are entitled to vote prompt notice that the corporation has dissolved.
Finally, your certificate of incorporation may contain provisions allowing for one or more shareholders, or a specified proportion of shares or votes, to dissolve your corporation at will or upon the occurrence of a specified event. You should carefully review—or have an attorney review—your certificate of incorporation for any such provisions.
NOTE: This section only provides an overview of the main methods for voluntary dissolution by shareholders. The details of each of these methods can be complicated. Therefore, you may want to consider getting an attorney to assist you in properly carrying out the dissolution.
Note that dissolution, alone, does not:
Before you can file a certificate of dissolution (see below), New York requires that you obtain tax clearance. More specifically, you must obtain written consent from the New York State Department of Taxation ("DOT") that your corporation does not owe any back taxes or returns. To get the necessary consent, you must file a corporation tax return, making sure to check of the appropriate box indicating that it is a final return. If the DOT determines you have filed all necessary returns and paid all necessary taxes, it will issue a written consent to dissolve. You must include two copies of the written consent when you file your certificate of dissolution.
In addition, if your corporation has done business in New York City ("NYC") and is liable for any taxes or charges under the NYC administrative code, you must also obtain a consent from the NYC's commissioner of finance and include it with your certificate of dissolution. To obtain consent, contact the New York City Department of Finance, Collections Division, Vendor/Tax Clearance Unit, 59 Maiden Lane, 25th Floor, New York, NY 10038.
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 dissolving your corporation, you must file a certificate of dissolution with the Division of State ("DOS"). The certificate of dissolution must contain the following information:
The DOS has a blank certificate of dissolution form available for download. You may want to consult with a lawyer regarding proper completion of the certificate, especially if you dissolved based on shareholder action following a specific event as provided in your certificate of incorporation.
As mentioned above, you must include copies of the written consent from the DOT, and, if you've been subject to NYC taxes, also a copy of the consent from NYC's commissioner of finance.
You can file your certificate of dissolution and related documents by mail, in person, or by fax. There is a $60 fee to file your dissolution package. Filings submitted by mail usually will be processed in seven business days. Filings made in person in the morning may be processed the same day. Various forms of expedited processing are available for additional fees.
Be aware that your business name will become available for use by others the day 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 BCA, key winding up tasks include:
Regarding the last two 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, if any, 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.
Under the BCA, at any time after dissolution, you can give notice to all creditors and claimants by publishing a notice once a week for at least two consecutive weeks in a newspaper of general circulation in the county where your corporation's office was located at the time of dissolution. In addition, on or before the date of first publication in a newspaper, you must mail a written notice directly to each person believed to be a creditor or claimant at their last known address. Generally, claimants have at least six months after the date of newspaper publication to bring a claim.
Many of the specific 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.
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, filing fees, and general sets of instructions on, on the DOS website and the DOT 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.