How to Close Down a C-Corp
When a C corporation is started, the owners of the business typically have a bright hope for the future and fully expect the company to succeed. In reality, many of these companies end up closing down due to financial problems at some point. If you find yourself in this situation, you can close down the company with relatively little trouble and move on to other endeavors. To officially close down your business, you should dissolve the corporation with the state in which it was filed.
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Instructions
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Create a corporate resolution to dissolve the company with the board of directors of the company. Before the company can officially dissolve, the board of directors has to authorize it.
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Put the matter to a vote by the shareholders of the company. Depending on the bylaws, a majority or two-thirds might be required to dissolve the company. If the shareholders approve the dissolution of the company, you can proceed from there.
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Liquidate the assets of the company. This can include selling the inventory, equipment and real estate owned by the company.
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Distribute the assets of the company. You will have to distribute assets in the proper order. Typically, secured creditors come first, followed by unsecured creditors. Then you must usually pay any preferred stockholders followed by common stockholders.
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File the articles of dissolution with the state in which your corporation was set up. This is a form that includes some basic information and is similar to the articles of incorporation that you filed when you originally got started. You will have to pay a filing fee to the state and at that point, the corporation will be dissolved.
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Tips & Warnings
If your business cannot afford to pay its outstanding debts, you will need to file for Chapter 7 bankruptcy.
Failing to actually dissolve the company can result in some problems for you in the future. The state and federal government will still expect you to file tax returns each year until the corporation is dissolved.
