Sometimes you may decide to stop doing business as your company for various reasons. Maybe your business goals changed and you’re shifting to another business as your main one. Maybe the profits weren’t what you expected, competition is too tight, or you just decided that it was time to call it a day and you don’t really want to sell the business. Or maybe there is a particular state where you’ve done a lot of sales in the past but that particular area is underperforming and you want to stop doing business there. All of these things can happen for a business and we’re here to help you understand your best course of action if you decide to pull out of a particular area or stop doing business entirely. For legal, tax, and financial reasons, there are a number of steps you need to take to go through any of these processes the right way.
What are Dissolutions and Withdrawals?
A business dissolution is when a business shuts down in the state that it was originally created in. When you do this, every aspect of your business is shut down. You cannot operate any longer as a business. After the business dissolves, you would need to start a new one in order to operate as a business again. Legally it no longer exists.
Withdrawals on the other hand allow you to stop doing business and remove your registration in what we call a foreign qualified state (any state besides the one you initially registered your business in). After the process of a withdrawal, you can no longer operate your business in the state you withdraw from, but you can still operate in other states you’re registered to do business in, including the state of your original business formation.
Every business goes through cycles. If you’re just starting your business you may find yourself registering in new states, getting more business licenses, and needing more resources for expansion. In periods of decline due to market factors or increased competition, you may find yourself scaling back, deciding to strategically invest less in certain parts of your business, or finding ways to be more mindful in your decision making.
Both dissolutions and withdrawals can play important roles in your overall business life cycle.
Reasons for Dissolution
There are a number of reasons that companies may consider filing for a dissolution and dissolving their business. You might be getting bought out and you’re going through a merger. The business may have been temporary from the beginning if you had a specific purpose in mind that you accomplished. Maybe your company took a financial loss and you’ve decided to hedge your losses. Sometimes you might have key company executives or managers all want to retire and the business just doesn’t feel the same anymore. There are 3 types of business dissolutions: Voluntary, Involuntary, and Administrative.
Voluntary business dissolutions happen when the business owner(s) decide to close the business on their own. Involuntary dissolution usually happens due to a legal issue like a court order. Administrative dissolution is usually when franchise taxes or other obligations to the state are not taken care of.
It’s important for you as a business owner or stakeholder to be paying attention to ways you can improve your business to avoid voluntary dissolution. It’s just as important for you to have an accountant and business team you can trust to make sure you avoid issues with the state and any legal issues from your business dealings to avoid involuntary or administrative dissolution potential. If you need help making sure that you’re on track with your annual filings
Reasons for Withdrawal
If you’re considering a filing a withdrawal for your business, it may be because you have a new much larger competitor that entered a specific market that makes it no longer profitable or economically feasible to compete with them in that specific area or state. Or maybe you are trying to focus on an area that is far more profitable for your company long term so you’re strategically pulling out of certain states to make sure that you have the resources to capitalize on this specific opportunity.
Depending on what states your business is operating in, you might have higher tax burdens in specific states that warrant you consolidating your business into more business friendly areas. If you’ve ventured out into states beyond where you originally registered the business for a specific purpose and your business did not accomplish it, this may also be a reason for you to withdraw from a specific state or area.
Steps to Take for a Dissolution or Withdrawal
If you decide that the next logical step for your business is to dissolve entirely or file a business withdrawal, we’ve got you covered! There are other online services you can use to handle this process, or you can consult an attorney, but our team makes it as easy as possible for you so you don’t have to wonder if you completed each of the steps along the way or try to figure out if you filed your articles of dissolution or business withdrawal correctly.
To file your articles of dissolution to dissolve your business, it’s only $139 + state fees through our website. Filing these articles of dissolution will help you save money, end your liability, and do so in a way that leverages our experience to make it easier for you. Our dedicated customer support teams give you peace of mind and keep you notified at all points in the process.
To file a business withdrawal to take your state out of a particular area or close your business in a foreign qualified state, it’s also $139 + state fees through our website. Going through this process with us will help you limit your liability by keeping you from missing annual filings or fees in a foreign qualified state and it will also help you avoid having to pay unnecessary taxes in a state where your business no longer operates.
If you have any questions before starting this process and would like more information, use the chat function on our website or contact us and we’ll be happy to help!