How to Dissolve a Corporation

Posted on August 24th, 2009 by aileen

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With the present economic crisis, it’s not surprising to hear about corporations being dissolved. It’s a sad news not only for the company owners, but also for the shareholders and employees of that corporation. If you find yourself in this dilemma, keep in mind that it’s very important to properly dissolve a corporation to avoid liabilities and other problems. Here are a few things you have to know.

Call for a Corporate Meeting

The board of directors must meet and discuss how to go about the process of dissolving the company. They should make a proposed plan to present to the company’s shareholders. How you go about this process will depend on your country’s laws. Most commonly, the proposed dissolution plan should get at least 2/3 approval from your shareholders. After the shareholders have approved the proposed plan, the corporation must file the appropriate form. In the United States, you have to file IRS form 966 within a month.

Go to Appropriate Government Agencies

Steps vary in different countries and states. Before formally dissolving your company, you need to file a Statement of Intent to Dissolve to the proper government agency. It’s during this time that you need to contact your creditors and inform them about the dissolution of your corporation.

In some cases, you may be asked to file articles of dissolution. You may also need to get a tax clearance before you can distribute your company’s assets among your shareholders.

Notice to Creditors

Send a letter to all your creditors and those who might have a claim in your company. Include in the letter the following information:

The dissolution of your corporation
Where your creditors can contact you, like your mailing address
The deadline for making a claim
Instructions on how to make a claim and what will happen if the claim is not received within the given period.

Paying Debts and Distributing Assets

So as not to create confusion and avoid problems, it’s important that your creditors are informed on how they can make a claim. Set up payment arrangements to make it easier for all the parties involved.

After debts have been paid, the remaining assets of the corporation are then divided among its shareholders. You may also opt to sell some of the corporation’s assets.Don’t forget to file all distributions to the IRS.

Corporation Dissolution Announcement

You may be required by your government to have a notice of dissolution published in newspapers. This is also one way of informing your creditors and other concerned individuals about the current state of your corporation. Doing this will help all parties involved to make a claim and not miss out on the deadline.

Dissolving a company may be a bit more tasking than setting one up. Remember to keep everything in order and file the necessary documents to the concerned government agencies. If you enjoy reading this article, you’ll be enlightened to learn how to live through a recession.