A corporation or an LLC can at any time decide to undergo a business dissolution. Upon dissolution, the business will no longer exist. However, even after dissolution certain requirements exist. A business dissolution may be voluntary or by proclamation.
Procedure for Voluntary Business Dissolutions
1) Make the decision to dissolve the business
- In the case of an LLC, the LLC members will vote in accordance with the operating agreement.
- The dissolution of a corporation will require either a shareholder vote or the written consent of the shareholders.
2) Obtain consent from the Tax Department
- This is done when filing the corporation tax return and indicating that it will be the final return for the corporation.
- The tax department will check for any back taxes and if all returns have been filed.
- If everything is up-to-date then the Tax Department will issue consent to dissolve the corporation.
- Note that tax clearance is only required for corporations, and not LLCs.
3) File for dissolution with the New York Department of State
- When filing for dissolution of a corporation a Certificate of Dissolution must be completed. It is also necessary to include two copies of written consent from the Tax Department.
- When filing for dissolution of an LLC Articles of Dissolution are to be completed.
- A $60 filing fee is required for both types of business dissolutions.
The business will be dissolved once the paperwork is processed and the filer will receive a filing receipt as proof of dissolution.
The “Winding Up” Period of Business Dissolution
After the dissolution process, your business continues to exist in order to resolve some final matters. This is called the “winding up” period. Here are some of the matters that are usually dealt with at this time:
- Fulfilling or discharging business contracts.
- Collecting, selling or distributing business assets
- Discharging or paying business liabilities
- Prosecuting and defending any civil, criminal, and administrative lawsuits
It is important to follow any protocols established in the operating agreement or bylaws when dealing with these issues.
Dissolution of a Corporation by Proclamation
The New York Secretary of State can also dissolve a corporation if the corporation fails to file franchise tax returns or pay franchise taxes for two or more years. In this case the corporation will cease to exist, as in a voluntary business dissolution, but the corporation must continue to file returns and pay taxes returns until the corporation is reinstated or voluntarily dissolved as described above.
Procedure for Reinstatement of a Corporation
1) File any outstanding returns and pay any back taxes.
2) Pay any fees or penalties.
3) Once the corporation is up-to-date on payments and returns it will receive written consent for reinstatement from the Tax Department.
4) File the Certificate of Payment of Taxes received from the Tax Department and a filing fee of $55 with the Department of State.
5) The corporation will be reinstated once the paperwork has been processed.
A business dissolution can be a complicated matter, but with the right assistance it can be simple and worry free.
This post is for informational purposes only. It is not intended to be, nor should it be construed, as legal advice. Always consult an attorney, licensed in your state, before taking legal action.