Properly Dissolving Your Company With the Secretary of State
Perhaps your company isn’t doing so well or you would like to transfer the assets of one company to another. Whatever the reason for dissolving your company, you need to know that there is both a wrong way and a right way to dissolve it with its respective Secretary of State or Department of Corporations. An improper dissolution could prove to be detrimental to the officers, but a proper one provides business owners with another layer of protection from liability.
First, you shouldn’t just allow your company to be administratively dissolved. This can be done in many ways such as failing to file an annual report, failure to pay a required fee, or ignoring another state requirement. While these methods seem like an easy way to do things, they could potentially have serious consequences. For example, in the event that your company is sued and found liable, the officers of the company may be found personally liable since the company was involuntarily dissolved. Therefore, officers should make every attempt to properly dissolve a company in order to protect their own interests.
The proper way to dissolve a company at the state level is by filing something that is often referred to as the “Articles of Dissolution”. This document is usually filed with the Secretary of State or Department of Corporations and is associated by a fee to the state. This filing is usually a template that details your company’s name, date of organization, and the method by which the dissolution is being done (i.e directors’ resolution, vote of shareholders, etc). For maximum protection, you should record the method of approval in your corporate record book with a waiver and special meeting minutes.
In addition to other things such as filing a final tax return and distributing all company assets, properly dissolving your company with your respective state could help prevent possible personal liabilities down the road. But failing to properly do so could help persuade a court to “pierce the corporate veil” and leave the officers of the company liable. If you have any other questions about business formations, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer any of your questions. Please contact us at (618) 997-3436.