How to Close a Corporation

Closing a corporation properly is just as important as forming one. Each state has its own procedure and documents for closing down corporations, but they are generally similar. Failure to follow the procedures and securing the Certificate of Dissolution can leave directors, officers and shareholders open to personal liability for any claims against the corporation. Here's how to do it properly.

Difficulty: Moderate

Instructions

1. Call a meeting of the board of directors and draft a resolution by the board to dissolve the corporation. Record the resolution and the vote in the board's minutes, and retain a copy of the board minutes in the corporation's record book.

2. Present the board's resolution to the shareholders. The shareholders must also vote to approve the dissolution. Some states require a simple majority while others require a 2/3 majority of shareholders to approve the closing of the corporation.

3. Fill out and file the Articles of Dissolution document with the Secretary of State. In some states, such as California, this is a 1-page document. Other states' documents are more extensive. Be sure to complete the entire document.

4. Pay off all the corporation's liabilities and distribute all the corporation's remaining assets once the Secretary of State approves the Articles of Dissolution. Consult a CPA to determine the income tax implications of the distribution of assets to the shareholders.

5. Coordinate the filing of the final income tax returns for the corporation to coincide with the closure date. Failure to file the relevant returns delays closure and will result in penalties and interest until they are filed and accepted.

6. Recognize that the directors, officers and shareholders have personal liability for debts, claims and product liability issues until all the necessary documents are approved by the Secretary of State and the final tax returns are filed.