In today’s BB segement, we’ll be going over the basics of dissolutions. What they are, why someone would want one, and what to do if you accidentally dissolve when you didn’t want to.
First of all, what is a dissolution?
A dissolution is a formal closure of a business with the state. A corporation or LLC must file articles of dissolution in order to complete the termination of a business. Upon being dissolved, the business will no longer need to file annual reports, pay state fees, taxes, or be seen as active in the eyes of the state. Continue reading
Many of life’s burdens – big and small – are lightened with a friend for support and this lesson has not been lost in business. If you’re thinking of starting a business with a friend or family member, you’re not alone. Some of the most enduring and positive American companies were founded by a couple of friends who had an idea. They didn’t always have a lot of start-up cash, but they had each other.
- UPS was started in 1907 by two teenagers with a single bicycle and a hundred dollars borrowed from a friend. Back then the U.S. Parcel Post wasn’t around and there was plenty of opportunity for the American Messenger Company of Seattle, Washington.
- Ben and Jerry met in seventh-grade gym class in 1963. A decade later, they took a five-dollar correspondence course in making ice cream.
- In 1978 two 20-something friends, John and Rene pulled together $45,000 to open what started as SaferWay and later became Whole Foods Market. Times were so hard on the friends they lived in the store and reportedly bathed using the hose disconnected from the dishwasher.
Corporate dissolution can be a touchy topic since dissolution is associated with a business going under, but there are lots of reasons for a business to shut down. For example, you wouldn’t want to keep paying fees and renewals for an LLC that was founded with a specific purpose, like building a housing tract, after that purpose is fulfilled. Nor would you expect an entrepreneur to balk at a particularly lucrative opportunity that would divert too much attention away from their original business. Whatever the reason, there may come a day when your corporation or limited liability company has to file their Articles of Dissolution and close down for good. If that day does come, you may find yourself wondering what else you have to do to finalize the dissolution. To help prepare our readers for any possible future, we decided to use a Business Basics post to outline what, exactly, has to be done during dissolution.
Vote on Dissolution
Most states require that the managing members (in the case of an LLC), or the board of directors (in the case of a corporation) votes, and agrees, on dissolution. If the corporation is publicly traded, the shareholders will also have to vote and agree on dissolution. If you cannot secure that vote, you will probably not be able to dissolve the business. Now, lawsuits can be filed to force dissolution, but these suits are rarely in the best interest of the directors, executives, or managing members. So when you start the dissolution process, make sure you can secure enough votes to get past this first hurdle.
Whatever the reason — some companies must “close the door” and stop doing business. Without formally terminating a corporation or LLC, owners could still be charged fees associated with the business. A Corporation or LLC must file Articles of Dissolution (sometimes referred to as Certificate of Dissolution or Certificate of Cancellation) when it needs to terminate its existence. As we near the end of the year, there are many benefits to dissolving before 2011. Continue reading