A business may dissolve for many reasons, but when it comes time to close the doors and the books, it is important to follow proper procedures to avoid as many potential conflicts as possible. Some business owners dissolve their businesses poorly, leading to lasting disputes and lingering financial burdens that might have been avoided with some careful planning and attention to detail.
If you face the dissolution of a business, make sure that you have a clear understanding of the legal implications of the process. If you do not take the process seriously and rush through for one reason or another, you may create major financial and legal problems for yourself and for others. A strong legal strategy helps keep your priorities and rights secure while you close this chapter and move on to the next.
Examine business articles
Many forms of business must create articles as part of their founding process. If your business has business articles, it is wise to consult them and follow the relevant guidelines. Articles should lay out clear instructions surrounding how to divide assets and liabilities among owners, as well as other instructions. While following these articles may not leave all parties satisfied, doing so is typically safer for all parties.
Notify government and licensing entities
Unless your business is very small, it is important to properly notify the appropriate government agencies of the dissolution, as well as any licensing organizations that apply to your business. These include federal agencies like the IRS, as well as local entities. Each agency or organization may require specific actions, so it is wise to get a strong understanding of these processes using high-quality legal resources.
Notify others and resolve outstanding balances
Operating a business often involves working with numerous creditors. Simply closing your business does not remove its obligations to these creditors, although some forms of business may have lower liability than others. As you dissolve a business, you must also resolve these debts, and collect from those who owe the business. While all parties often end up compromising, it is important to address each of these debts during the dissolution process.
If the business has stakeholders, they must also receive proper notification. This process is particularly important to carry out properly. If the business has assets, owners typically distribute these according to percentage ownership, but it can take some planning and negotiation to determine the exact breakdown of assets and how to carry out distribution. Depending on the nature of these assets, state laws may place regulations on how you must distribute them.
Make sure to consider each of these issues in detail before you dissolve your business. A strong legal strategy set up before beginning the dissolution process helps ensure that you understand the requirements of the law and the tools that you have to protect your rights while you move from one chapter to the next.