Dissolution of a Corporation
The laws governing dissolution of a corporation vary slightly from one state to another. Overall, the procedures utilized to dissolve a corporation are the same in all jurisdictions in the U.S. The process of dissolving a corporation is based on the law of the state where the enterprise was incorporated in the first instance.
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Function
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The function of dissolving a corporation is to wrap up its affairs and terminate its operations. The failure to satisfy each segment of the process results in the corporation not terminating operations and continuing in existence despite the wishes of its board of directors and shareholders.
Resolution
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The dissolution of a corporation process commences with a resolution of the board of directors. The resolution is not complicated and merely directs appropriate corporate officers to settle all debts, distribute assets and terminate operations of the corporation. The resolution also directs the secretary of the corporation to file standard form dissolution documents with the secretary of state.
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Debts
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Before a corporation lawfully dissolves, it must satisfy all outstanding debts and liabilities. The process of dissolving is delayed if there is a pending lawsuit. The claim must fully be litigated or settled before that potential liability to the corporation is satisfied.
Assets
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After the satisfaction of all debts, the distribution of assets occurs. Any assets that are not liquid (equipment, for example) are sold and converted to cash. A distribution of liquidated assets to shareholders occurs in accordance with the terms of the articles of incorporation and the specific laws of the state of incorporation.
Secretary of State
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The final step of the dissolution process involves filing the standard form dissolution document with the secretary of state. The form oftentimes is captioned "Articles of Dissolution." The form is available both in the brick-and-mortar world office of the agency as well as through its website. Typically, the president of the corporation and the corporate secretary sign the document.
Internal Revenue Service
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Although the corporation legally dissolves with the filing at the secretary of state's office, Form 966--Corporate Dissolution must be completed and filed with the Internal Revenue Service. Form 966 is available through the IRS website.
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