If you will not close your business with the state, your corporation will be considered as a legal entity and accordingly you will be liable to pay taxes and other returns thereof (assuming you are not longer conducting business). Dissolution is the process of officially closing out the business. It is highly recommended that you should close your business officially as per the instructions and rules defined by the state and get your certificate of dissolution.
Advantages of Proper Dissolution
There are two main reasons why you should close the company officially even though it’s no longer doing business:
Taxes and Fees:
As long as the legal entity exists it is liable to pay taxes and other fees. If you want to avoid those unnecessary expenses it is highly recommended to close the business according to the rules defined by the state and get your Certificate of Dissolution. Until you get it, your company will be held liable to file all relevant federal, state, and municipal tax returns. Failure to file these returns will result in the heavy penalties and fees associated with the late filing.
Even if you have already stopped your business operations, legally your corporation/LLC, directors, and officers (in some cases also shareholders/members) will be still considered as personally liable for certain aspects of the company business unless you file cancellation legally.
Canceling a company means you are going to wind up your business. In this connection the first step is to hold a meeting of corporation’s board of directors in which they need to propose a resolution for business closing. A vote must be taken and the minutes of the meeting must be recorded and retained in the corporate records. Then that proposed dissolution action must also be approved by majority shareholders
Secondly, the corporation needs to file official paperwork with the secretary of state. This filing varies from state to state. In some states this is done with a simple certificate while others require a more complex process. This is the process EZ Incorporate does for you.
You may also need to provide proof of tax clearance to show that you have paid your companies taxes.
If, for any reason, you do not close your LLC or Corporation with the state, the consequences can be severe and will take you paying heavy penalties in different areas. Some of the consequences you may be indulged to deal with include the following:
Personal Liability. Even if you have already stopped your business transactions, legally your corporation, Directors, Officers and shareholders will be still considered as personally liable for the corporation unless you file cancellation legally.
Tax Liability. Until you get certificate of dissolution, your corporation will be held liable to file all relevant federal, state, and municipal tax returns. Failure to file these returns will result in the heavy penalties and fees associated with the late filing. And many more
If a corporation does not have officers, dissolution must be approved by a majority of the directors in office at the time dissolution is approved. The corporation shall provide notice to directors of a director’s meeting where an approval for corporation termination will be sought. The notice must state that the purpose of the meeting is to consider the proposed business termination
The corporation must notify each director or shareholders, whether or not entitled to vote, of the proposed members’ meeting. The notice must state that the purpose of the meeting is to consider dissolving the corporation.
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