Dissolutions, Withdrawals, and Reinstatements: What Small Businesses Need to Know

The lifecycle of a small business requires understanding what it means to dissolve a business, file a business withdrawal, and file for a business reinstatement.

Even if you don’t think these terms apply to your business, you may need to put in a request for one — or more — of these filings. Let’s take a closer look at the definition of each term and when you might consider starting filing paperwork. Plus, here’s how filing these articles impacts small businesses.


What Is a Dissolution?

A dissolution is a formal closure of a business with its state of incorporation. Formally closing a business means the registered company is no longer active through the eyes of the state.

What if an LLC or corporation does not file articles of dissolution? The state will see the business as active. The company will need to file annual reports. They must also pay state fees and taxes.

When Do I Need to Close My Business With the State?

The answer to this question will vary. It depends on where your business is in its lifecycle. Specific circumstances play a key role in determining voluntarily dissolving a business. Some of these include:

  • The business has run its course.
  • The business owner would like to move on. They plan to start a new business.
  • This specific business can no longer make money.

What If the Business Faces Involuntarily Dissolution?

An involuntary dissolution may occur when a small business falls into bad standing with the state. Falling into bad standing starts when a business is late to file its annual report or fees and taxes. This is also true if the business does not file an annual report or pay for fees and taxes.

The longer these items are not resolved, the longer the business will stay in bad standing. If the necessary paperwork is not filed or fees are not paid, the state may involuntarily dissolve the business. Should this happen, the owner may be able to get the business back into good standing with a business reinstatement.

How Does a Dissolution Impact My Business?

Closing a business means conducting a bit more due diligence beyond locking up the doors forever. A business closing its doors needs to take the proper steps before wrapping up its operations.

Filing articles of dissolution means everyone in the business formally agreed to close the business. They understand the necessary next steps to formally closing the business with the state. The business must file its annual return. They need to pay all taxes, cancel business licenses, notify and pay employees, and pay off any outstanding business debts. Doing this keeps the owner of the business from paying any state fees or taxes associated with the business.


What is a Business Withdrawal?

A business withdrawal allows you to close your business in a foreign state.

Filing a withdrawal means the business no longer has obligations to a foreign state. As such, the business can terminate its existence in this state.

When Do I Need to Close My Business in a Foreign State?

Generally, a corporation or LLC needs to file a foreign qualification if they want to conduct business in a state different from its state of incorporation. This attests the business is may legally conduct business in this state. They also plan to meet the state’s annual tax and compliance requirements.

Filing for a business withdrawal means your business will not operate or conduct business in a foreign state. Several factors may be considered for knowing “when” an entrepreneur decides to file a withdrawal and close the company in a foreign state.

How Does a Business Withdrawal Impact My Business?

Filing a business withdrawal tells the foreign state the business no longer exists.

Businesses which dissolve and are registered to do business in another state must file an application of withdrawal in these states. This ensures the business is closed in a foreign state. It also keeps the business owner from being held liable for filing future annual reports or paying other fees.


What is a Business Reinstatement?

A business reinstatement allows business owners to reinstate an LLC or corporation. This entity has fallen into bad standing with its state of incorporation.

Do you need to file other paperwork aside from an application to reinstate the business? The Secretary of State may request filing additional forms. Some of these may include a letter of good standing or reinstatement packet submissions.

When Do I Need to Reinstate My Business With the State?

It’s critical to understand your dissolution status before filing a reinstatement.

Your dissolution status is voluntary or involuntary. A business voluntarily dissolved may decide to reinstate if they feel like it’s time to get back to business.

For involuntarily dissolved businesses, there is usually an action associated with the business. Examples include forgetting to file an annual report or writing a bounced check for a fee payment. These actions allowed the business to fall into bad standing with the state. If no action is taken to fix this issue, you will need to file additional documents when reinstating your business.

For example, let’s say you forgot to file your annual report. Upon reinstating the business, you will need to fill out an application for reinstatement. Then, file a delinquent form. Additionally, you need to pay the reinstatement filing fees. You may also pay other fees. A delinquent annual report will require paying filing fees per each delinquent annual report year.

How Does a Reinstatement Impact My Business?

Voluntarily or involuntarily dissolved businesses have a second chance to start again. A reinstatement impacts involuntarily dissolved businesses. It allows them to remove the bad standing non-compliant mark. Then, they get back to good standing again.

Try to avoid making the same mistakes after reinstating your business. File all annual reports and paperwork on time. Pay all fees and taxes by their deadline. You’ll receive peace of mind. You are back in compliance once again.

Always stay in compliance with your small business. Visit mycorporation.com and our team of professionals will assist you with your small business needs.