If you’re a business owner, there may come a time when you wish to close your company. While articles of incorporation are used to form a company, articles of dissolution are filed to end your Limited Liability Company or corporation and put the state on notice of your intentions. Filing this document doesn’t mean you’re done with your business — it simply means you want to be done. You must still follow through with the wind-down process.
What Are Articles of Dissolution?
An article of dissolution is a formal document that ends the existence of your business entity. Effectively, this document is the opposite of articles of incorporation. If you fail to file articles of dissolution when you decide to close your company, the state, creditors, and others will assume you are continuing to do business — and you will still be expected to file reports and pay taxes. Failure to properly dissolve a business can also mean you will be held personally liable for any outstanding liabilities of your company.
In drafting the articles of dissolution, you must list the name of the corporation or the Limited Liability Company, the name under which the company was organized, and the date the articles of organization were filed. The document also requires the dissolution method and the signature of a member, manager, or another authorized person. All LLC or corporate owners must agree to the dissolution. Articles of dissolution are not necessary to dissolve a sole proprietorship.
The Wind-Down Procedure
After you file the articles of dissolution, you cannot simply close the doors of your business. A number of legal obligations must be met and business requirements that need to be satisfied before your company can cease its existence. During the wind-down process, a business must wrap up any old projects and cannot take on new ones.
Typically, one or more of the LLC’s members or managers will handle the wind-down process. Key tasks during this process include the following:
- File articles of dissolution
- Satisfy outstanding debts
- Dispose or convey any company property
- Distribute remaining assets to the owners
- File your final tax return
When it comes to discharging liabilities and making distributions to members, payments must be made in a specific order. Significantly, creditors must be paid first. Next, distributions can be made to current and former LLC members based on their withdrawal, unless the operating agreement states otherwise. Lastly, any remaining assets should be returned to LLC members in accordance with their contributions if they were not previously returned — and distributions should be made to members based on their membership interests.
Although New York does not require tax clearance before you can dissolve your business, the New York Department of Taxation and Finance encourages you to file your final business tax returns as soon as possible — including a final Form NYS-45 for quarterly withholdings. Once you’ve discontinued your business, a final sales tax return should be filed within 20 days if you sold goods.
Keep in mind that if your business is registered in other states, you may need to file separate forms in those jurisdictions to terminate your company’s existence.
Contact an Experienced New York Business Law Attorney
Closing a business isn’t necessarily as easy as it sounds — if the proper procedures aren’t completed, you could face significant financial and legal ramifications. A diligent business law attorney can help guide you through the process of filing articles of dissolution and going through the wind-down procedures. Brinen & Associates is committed to providing high-quality representation to entrepreneurs and corporate owners for various business matters. Call (212) 330-8151 or send us a message to learn more about how we can help.