Dissolving a business is challenging since you have to follow the right procedure. You need to take enough time to ensure everything is in order. Failure to which you can be subjected to liabilities, and it might take you longer to accomplish everything.
The good news is that you can consider contacting a professional for advice on startup shutdown to help dissolve your business. This article will explore what you can learn from experts on how to dissolve your startup.
What It Means To Dissolve a Business
Many things can lead to the dissolution of a business, such as failure to pay certain taxes, failure to file annual reports, bankruptcy, or voluntary dissolution by business owners. You can voluntarily dissolve a business by filing articles of dissolution, which is required to end its existence in your state of incorporation. Additionally, it’s a requirement in your state of qualification if your business was registered to transact in another state.
Consequences For Not Dissolving Your Business
Any business must file annual reports and taxation in their state. When you fail to dissolve your business after violating these requirements, you must pay penalties that can keep accumulating. Unless the state knows your business no longer exists, you will be required to meet these obligations.
You must learn how to dissolve a business to avoid such complications and end the obligations. Below are the steps you ought to take when dissolving your business.
1. Get Approval From Owners Of The Corporation Or LLC
When dissolving your corporation, you need to get the approval of the stakeholders. However, with LLC, the members must approve. The LLC operating agreement outlines the dissolution process and the required approvals. The bylaws guide corporations and require the board of directors to draft and approve the resolution. The shareholders must vote and document it in the corporate record book. You need to document the decision and members’ approval with the LLC.
2. Ensure You File The Dissolution With The State
After shareholders agree on the dissolution of the company, it’s important to file paperwork with the state in which your LLC or corporation was formed. If you live in Colorado, you must ensure you follow the regulation set by the state. To dissolve an LLC in Colorado, you must follow the regulation set, such as filing and clearance of taxes. So, if your company was transacting in another country, you must also fill out the paperwork in that state.
3. File Federal, Local, And State Tax Forms
One of the crucial things to do during the dissolution of business is to notify the IRS and the local and state tax agencies. Your tax obligation may not cease immediately after ending your operations. The IRS has a website that has a checklist for businesses that need to dissolve. This will indicate the required forms that you should fill out and the state and local requirements.
The above are guidelines to dissolve your startup properly. It’s important to follow the set guideline to avoid penalties. File the necessary files with the state where you have registered your business and the foreign state in which your business transacts. When dissolving, you should inform the creditors to solve any complaints or unattended matters.