Not every business will succeed. Whether due to hard times, mismanagement, or a fatal stroke of misfortune, businesses fall. When it becomes necessary to close a business for good, the proprietors will have to undergo the process of business dissolution.
Business dissolution refers to the legal process of having a formally recognized business disbanded. Unless a corporation or business has been formally dissolved, it is not considered to be completely closed down.
The steps necessary to dissolve a business depend on the structure of the business. If there is a board of directors or other governing body, it may be necessary to take a vote to voluntarily dissolve the company. If there are not procedures in place for dissolution, then the dissolution will proceed according to the state law that the business exists in.
Once the decision to dissolve has been made and recorded, there are a number of housekeeping procedures that must be completed. First, a final tax return for the business must be filed. Then articles of dissolution must be filed with the state in order to officially petition for dissolution. Next, debts must be settled and assets distributed according to either company procedure or state law. Finally, employees must be let go, business accounts must be closed, and Federal Employer Identification Number and state tax identification numbers must be terminated.
The cost of dissolving a business can range from a few hundred to a few thousand dollars. There are some services that claim to be able to help dissolve a company for free, but there are still state filing fees that must be paid. Additionally, if the business is registered in multiple states, then it must be dissolved in each state in which it is registered. A more costly but frequently more important step is to hire a business law attorney to ensure that all bases are covered and the process is done correctly.