When a business is dissolved, it is formally and legally closing its operations. This involves more than just deciding not to run the business and keeping the doors closed. This process includes:
Filing Dissolution Paperwork
A legal process is required so local and state records can recognize and mark a business as closed. This is important as it also means the company will no longer be expected to pay taxes.
Liquidate Assets
Once a business is dissolved, it must eliminate assets including property. For example, a company can’t shut down but choose to keep owning an office building. These assets must be sold if they’re not already collateral for loans.
Resolve Liabilities
In this case, liabilities refer to any outstanding obligations a business may still have. This can include fulfilling final orders, paying out salaries to employees, and settling the last tax payments to the state. Just because a business is closing down, doesn’t mean that the company is free from its outstanding debt.
Notification
The final act of dissolution is notifying relevant parties of the business dissolution. This may include creditors, shareholders, or even clients and customers. Who receives a notification is business dependent.
The Reasons
Businesses dissolve for many different reasons. The company failing to make a profit is the most common, but many other factors can also be at play. Small business owners may decide to retire, and sometimes the state government may dissolve a business. State dissolution only happens if there are state requirements a company fails to meet, such as submitting an annual report or maintaining a registered agent.
The Options Afterward
Once a business is dissolved, it is considered “dead,” but business owners have a few options available to them if they want to try again. The easiest path to take is to start a new business, which involves going through all the steps of creating a business from scratch once again.
The other option is business reinstatement. The records and data are stored in state archives if a company has been properly dissolved. Business reinstatement is a way to “revive” a company, retaining its name and other important factors surrounding it so it can operate again. Whether this is permitted and the exact process varies from state to state.
However, business reinstatement is complex and has many requirements that must be met before the state agrees. If there are outstanding issues that need to be resolved, such as unfiled annual reports or failure to pay franchise taxes, owners must get back in compliance before any other progress can be made.
The most comprehensive way to restore a business is to work closely with companies that offer business reinstatement services. Every requirement is met, and all administrative work is correctly filed with the help of experienced professionals.