What’s the Best Way to Wrap Up or Dissolve Your Business?
It has been said that all good things must come to an end. That could one day include your business. The end of a business isn’t always a failure; sometimes it’s just time to wrap it up, retire, or move on to new business ventures. But here you are, with an operating business, and you need to walk away from it…but how?
There are a number of ways that an operating business can wrap up its affairs.
Letting it Legally Dissolve
Letting the company legally dissolve is easy—just don’t file your renewal paperwork with the State. But that doesn’t automatically close your doors, pay your creditors, or liquidate your assets. It doesn’t distribute any profits, assets or proceeds to shareholders or owners.
Worse, if you just let the company dissolve with the state, before you have really tied up all the loose ends, you could be on the hook for personal liability. Once the official charter with the state ends, you are no longer operating under the protection of the corporate veil. That means that you personally, could be liable for any legal errors or liabilities the company incurs while it is wrapping up, if it is no longer an official company with the State of Florida.
Following the Governing Documents
Hopefully, your company has some kind of corporate bylaws, like a management agreement for an LLC, or bylaws for a company, or a partnership agreement for a partnership, that address the method of closing or ending the company, and addressing who gets what out of any remaining assets.
If you don’t have one of these documents, the default will be the Florida statutes, which will dictate how the company’s assets are distributed.
If you have creditors, one part of wrapping up affairs will be selling and liquidating assets. You have a legal and fiduciary obligation to the company to liquidate company assets for the highest amount possible, thus maximizing any profits or assets remaining to be distributed to shareholders or other owners.
You can handle this part yourself, or contract with outside liquidators, who will sell your corporate assets and in some cases, they may even negotiate with your creditors to lower any outstanding amounts due.
Note that some assets may have value but may not be amenable to corporate liquidation. For example, an extensive customer list of plumbing clients may have extraordinary value to other plumbing companies, but may have no value just being liquidated at a public auction.
Sometimes a court may need to get involved in ending a business. This often happens when owners, partners, or managers disagree on whether to end the company at all, or disagree on who gets what from the proceeds of any assets, or both.
In some cases, if an owner or partner wants to continue operating the business, she or she can opt to do so, but can pay out to the “leaving” owner, a fair amount for that former owner’s interest in the business.
Starting or ending a business? Do it the right way. We can help. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.