Important Considerations When Dissolving a Business
No one starts a business with the intention of closing it down. But the reality is that most entrepreneurs start and dissolve several businesses before they find the winning combination that assures their financial future. Today’s economic climate is tougher than ever and even once-flourishing businesses find themselves contemplating termination. When your venture has reached the point where the time has come to close your doors, it is important to consult with a business lawyer who understands the serious legal consequences of dissolving a sole proprietorship, partnership, corporation or limited liability company.
While it is sometimes possible to merely stop operations and walk away from the business, doing so can leave the entity intact and open yourself up to future lawsuits from creditors or other interested parties. Proceeding with a formal dissolution process through experienced legal counsel is a much safer bet.
The specific steps you need to take in order to ensure your business is properly dissolved vary according to how your business is organized. A sole proprietorship is the easiest type of entity to legally dissolve. Since there are no shareholders, the decision to terminate the business does not require third party approval. Dissolving a corporation or LLC means that you must obtain the written permission of the other owners. How complex the process for doing so turns out to be depends on a number of factors. Generally, doing so will require a majority vote of the initial directors or a majority of the incorporators if there are no directors, or by the shareholders by either majority vote or unanimous written consent. There are also administrative and judicial routes that might be available, but obtaining permission is the safest path.
After ensuring that all parties agree to the dissolution, the next step to dissolving an Illinois corporation is to file a specific document called Articles of Dissolution with the Secretary of State’s office. The form requires confirmation that the dissolution has carries the required approval and authorizations.
The decision and the paperwork are the easy parts. It is important to create a plan of liquidation and dissolution that will specify how the assets and liabilities of the dissolved business will divide between the owners and other third parties like customers and creditors. This is the stage where experienced legal counsel will review any ongoing insurance policies, contracts, rental leases or special licenses to make sure the dissolution process terminates them fully.
Consulting an experienced Hoffman Estates and Des Planes attorney can mean the difference between a well-structured and individually tailored dissolution plan that protects you from tax and legal liability and one that does not. It also might be possible for your attorney to negotiate with any remaining creditors and obtain more preferential payment terms.
Contact a Hoffman Estates and Des Plaines lawyer today to make sure that you dissolve your business in the proper way.