How to Dissolve a Corporation

Learn the basic steps for dissolving a corporation in your state.

With corporations, there may come a time when the people who own and run the business voluntarily decide it's time to call it quits. If you've reached this point, you'll need to follow certain steps in order to formally dissolve your corporation and wind up your business.

Dissolving the Corporation

You created a corporation by filing documents with your state and you'll need to go through a similar process to formally dissolve it. Otherwise your corporation will continue to exist even if you no longer conduct any business through it. That means your state filing and other legal obligations continue and the corporation remains open to lawsuits and can incur additional liability. So it's important to follow through with the necessary filings once you decide it's time to close up shop. Each state has its own rules so you may want to seek help from a business lawyer to make sure you comply with your state's requirements.

Board Meeting to Vote on Dissolution

The first step in dissolving a corporation usually involves having your board of directors and shareholders vote to approve the dissolution. Under most state rules, you start by holding a meeting of the board of directors to vote on a resolution to approve the dissolution of the corporation. Once the board has approved dissolution, the matter can then be submitted to the shareholders for their approval.

The exact rules for what type of vote and action is required by directors and shareholders vary state by state. You'll need to check your state rules as well as your articles of incorporation and bylaws in case you have any special requirements for dissolution. You will also want to make sure you provide proper notice and keep good records of any corporate action taken on dissolution.

File a Certificate of Dissolution With the State

Once you have the necessary corporate approval to dissolve your corporation, your next step is to file an official certificate of dissolution with the state. Most states have a certificate of dissolution form that you can file by mail or, in some states, online.

Check your secretary of state's website (or your state corporate filing office) for your state's dissolution form and filing requirements, including required fees. Even if a certificate is not legally required, it is highly recommended that you file a certificate with the secretary of state to complete the voluntary dissolution of your corporation.

Winding Up Your Business

After dissolution, your corporation continues to exist for the purpose of winding up its business. This generally means discharging all of the corporation's liabilities and obligations, resolving all outstanding claims and lawsuits against the company, and distributing any remaining assets to stockholders.

Notice to Claimants

Another key task with dissolution is to give notice to anyone with a potential claim against your corporation. While this may not be legally required, it helps limit your liability and allows you to more safely make final distributions of your corporate assets to shareholders. There are strict rules about giving proper notice so you may want to consult with a business attorney if this is an issue for your corporation.

Tax Clearance

Some states require you to obtain tax clearance before you file your certificate of dissolution. Others require you to pay all taxes due before filing your certificate. You will need to check your state rules for dissolution and tax clearance. On your final state and federal tax filing, you check the box marked "Final Return" to indicate that you have dissolved your corporation.

Bank Accounts, Permits, Out-of-State Registrations

Make sure you close all your business bank accounts and credit lines and cancel any permits or licenses or anything else held in your business's name. You'll also want to notify your customers and vendors about your company's dissolution. If your corporation is registered or qualified to do business in another state, you must file the necessary forms to terminate those registrations. Otherwise you will continue to be liable for annual fees and minimum business taxes in those states.

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