Dissolution of a corporation is a multi-step and complex process which requires following regulations of the Internal Revenue Service and the laws of the state where the company was incorporated. Corporation dissolution is usually voluntary, but in some cases it may also be state ordered.
This occurs generally when a corporate fails to file necessary information statements with the state of incorporation or fails to pay or file corporate taxes. The dissolution process remains the same regardless of the decision.
Attorneys at SBEMP (Slovak, Baron, Empey, Murphy & Pinkney) law firm provides professional legal advice and services to clients in Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, Costa Mesa, San Diego, New Jersey, New York, and surrounding communities.
Articles of Dissolution
All state laws require articles of dissolution to be filed to dissolve a corporation officially. Requirements tend to vary on whether the entity was public or private. However, most corporations are required to provide at least the filing date, the name of the corporation, and the date from which the dissolution comes into effect.
Corporations also need to provide the dissolution decision and all information regarding unpaid taxes and pending legal actions. In some states, a corporation is required to provide information regarding assets, liabilities, and the debtors list.
Permission to Dissolve
The decision to dissolve can be taken through a board meeting in privately help corporations. However, publicly held corporations need to get shareholder approval to commence the dissolution process. The process would typically involve informing all shareholders about the board’s intent to dissolve.
They would need to hold a shareholders’ meeting to allow shareholders to vote after discussing the dissolution proposal at length. The only way public corporations can start the ball rolling is if they have a majority of shareholders voting in favor of dissolution.
Notice of Intent
Public corporations are required to file a notice of intent in many states after getting the shareholders’ approval. Typically, the corporation name, date of adoption for the dissolution proposal, and a statement confirming that the decision has majority shareholder vote are legally required to be included in the notice of intent.
All corporations are legally required by the IRS to file Corporate Dissolution or Liquidation (IRS Form 966) within 30 days of filing the article of dissolution. Public corporations are required to return shareholder investments and provide a 1099-DIV to all shareholders receiving $600 or more.
Corporations that are licensed to carry out business in multiple states are required to get in touch with individual corporations division in those states and acquire a certificate of termination or an application of withdrawal.
This document is necessary to officially terminate all rights of the corporation to conduct business within the said state. It also relieves the entity of all future fee requirements and reporting. Failure to comply with this final step could mean that the corporation remains liable for state taxes and annual reporting fees even when the business does not exist officially.
Lawyers at the SBEMP law firm serve clients from Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, Costa Mesa, San Diego, New Jersey, New York, and nearby locations for a range of legal practice areas.
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