Best Practices When Dissolving a Business
When an owner is faced with dissolving a business entity (or winding up a business), there are multiple considerations the owner is faced with to facilitate a smooth and legal process. For one, the entity type and the ownership amount will dictate the legal processes required for dissolution. The owner should consider the status of the business’ debts and when creditors should receive notice of dissolution. Similarly, a business that is still legally obligated by an order of a court has to resolve the matter before it looks to dissolve. Tax implications are also an important consideration.
Business Entity Type
The entity or business structure you have established will determine the steps state law requires for dissolution. If you own a corporation in Florida, you are required to file Articles of Dissolution either by mail or online and pay a fee of $35.00. This form is rather simple and includes boilerplate language that applies to most dissolving corporations. In order words, the paperwork is simply informing the state of the ending of the business. The forms are rather procedural and not very substantive. An LLC must also file Articles of Dissolution to start the process. The LLC should also look to its formation documents including its Articles of Organization and Operating Agreement to ensure that the business is being dissolved as agreed upon. All dissolution documents are filed with Florida’s Department of State. Parties must see to it that all the substantive processes of winding up the business is completed before filing the Articles of Dissolution.
As a part of running a business, the company may take on business loans or get into agreements with other companies and individuals. These are some of the liabilities the business has to ensure that its free from before dissolving the business. Owners are required to notify their creditors of their plan to dissolve. This will trigger a discussion about what happens owned monies. Further, all contracts the business entered into are also a form of liability. At the end of the entity’s existence, the owner must determine whether these contracts are to be lawfully assigned or terminated. Failure to lawfully end a contractual relationship can lead to lengthy litigation, which may increase the dissolution period. Similarly, the owner has to ensure that the business does not have any existing legal obligations per court orders.
The responsible party should notify the Internal Revenue Service about the winding up of the entity. However, this notification is not only limited to the federal tax agency. The local and state-based tax agencies should also receive notification. The business is wise to have a tax professional or accountant on call to discuss the implications the dissolution will have on the business’ tax filings. The tax professional is able to advise on which business assets are taxed and accounted for. They will also advise on which items are eligible for deductions and write-offs.
Fort Lauderdale Business Law Attorney
Dissolving a business can become a complex process depending on the size of the business and how many other owners are involved. Hiring an attorney to oversee the winding up and dissolution process is a wise step. With legal counsel, you increase your chances of getting it right once and for all. Florida attorney Brendan A. Sweeney has years of experience advising on business dissolution issues. Contact us now for a consultation.