How to Dissolve Incorporation
Before you take on a new business endeavour, you may want to dissolve an old incorporation. The task can be time consuming which is why it needs to be properly planned ahead of time. You need to take all the directors on board, file a few necessary forms, pay off the creditors and then sell or share any remaining assets. Remember that dissolving incorporation may result in legal or financial implications and then you also have to take into consideration federal and state laws. Here is how to dissolve incorporation.
Instructions
-
1
Schedule a board meeting. It is important that all the directors attend this meeting. Call for a vote from all the directors on dissolution of the incorporation. Almost all states will require a simple majority which means more than 50 percent of the directors must vote in favour of dissolution. However, in order to dissolve an incorporation, some states may require a 2/3 majority which means that on a board of 3 directors, 2 directors must vote in favour of dissolution.
-
2
Once the majority has been established, lay out an action plan. Make sure that the meeting’s minutes are recorded and stored in the corporate book.
-
3
Fill out the form 966 and submit it with IRS. This has to done within 30 days of the board meeting. Remember to read the instructions detailed on the form to fill it correctly. Check your state’s law because you may be required submit a Statement of Intent to Dissolve as well.
-
4
Notifying the creditors comes next. Send written notices to all your creditors and request them to submit their claims respectively. Once you have received claims from all the creditors, analyse them and pay or reject the claims based on your analysis. Make sure that you do this before or by the due date. You may have to sell assets to pay the claims filed by creditors.
-
5
Take care of the remaining assets. Either sell or distribute the remaining assets to the shareholders. The share of assets each shareholder gets depends on that shareholder’s percentage of ownership.
-
6
Finally, file the Articles of Dissolution form with Secretary of State's office. Make sure that you keep copies of all the documents in your corporate records for future reference if required.
