How to Dissolve Your Old Business Entity
After your new limited liability company (LLC) is set up and all the assets and contracts have been transferred from an old business structure, you can begin winding up the affairs and dissolving your old business structure.
If you were operating as a sole proprietorship or general partnership and you have executed a statutory conversion, which simply transforms your current entity into a limited liability company, you do not need to dissolve the old entity.
If your previous business structure was a sole proprietorship or general partnership, then you don’t need to complete any special filings. You just need to make sure that you don’t accidentally revert to old habits and put contracts, notes, correspondence, and debts in your own name. You also need to avoid combining personal funds with those of your business.
In some states, a partnership must publish a notice of termination in a local newspaper before it can be terminated. This public notice may even be required before the conversion can be effective. To find out whether this is the case in your state, call your secretary of state’s office.
Check out this website containing all state laws regarding business entities, real estate, and taxation. Enter the password onesmartdummy. Here, you can view your specific state’s laws, organized by topic.
If your old entity was a limited partnership or corporation, then you must file a certificate of dissolution (also called a certificate of cancellation) with the secretary of state’s office. This certificate terminates your old entity in the eyes of the state and keeps old ghosts, such as company creditors, from haunting you.
An officer, director, or member of the company must sign off on the certificate, and it can be filed only after all the company’s owners approve. To make sure that the dissolution is legal and thorough, be sure to hold a meeting, document the meeting minutes, and have all owners sign the company resolution to dissolve.
If your entity is registered to transact business in states other than the one in which you initially formed, then you’ll need to withdraw from those states before filing for a dissolution in your home state. This step is usually accomplished by filing a notice of withdrawal with the secretary of state of each state in which you’re registered, along with the requisite filing fee.
Before you can file a dissolution with the state or withdrawal from a state in which you’re foreign-filed, you must make sure that the company is in good standing with the secretary of state’s office and that no fees are due. You must also make sure that the company has paid its taxes. If the entity isn’t in good standing, the certificate of dissolution probably will be rejected.
Although the dissolution of an LLC has key differences from other entities, you may want to read Chapter 16 to get an overview before contacting your secretary of state to obtain more information on how to dissolve your particular entity type. An alternative to doing so yourself is to have a formation company handle the dissolution for you.
Because all the assets and contracts are being transferred to the new entity, filing the paperwork with the state is the last step in completing the dissolution. A good formation company handles dissolutions all the time, so it can make sure that you have all your bases covered. You still have to pay the state filing fees, but the fee that formation companies charge for this service is usually pretty nominal.