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Whatever the reason — some companies must "close the door" and stop doing business. Without the formal termination of a corporation or LLC, owners could still be charged fees associated with the business.
A Corporation or LLC must file Articles of Dissolution (sometimes referred to as Certificate of Dissolution or Certificate of Cancellation) when it needs to terminate its existence.
Whenever a Corporation or LLC is an active entity at the Secretary of State, it is in existence and has specific obligations to that state (such as filing Annual Reports, paying state fees, and paying taxes). Even if the company is not actually doing any business at all, as long as the company is filed with the state, it is considered to be in existence.
For this reason, it is important to officially and formally dissolve your entity with the Secretary of State in order to avoid any unnecessary fees.
We'll prepare your Articles of Dissolution for review and submission to the appropriate state agency in any of the 50 states.
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Whenever a corporation or LLC is on file with, and is an active entity at the Secretary of State, it is in existence and has specific statutory obligations to that state — even if it conducts absolutely no business whatsoever. A company that is considered to be in existence must file informational reports (such as Annual Reports or Statements of Information) and pay annual state fees and, often, minimum annual franchise taxes. (For example, California limited liability companies must pay an annual $800.00 minimum franchise tax even if they conduct NO business.) For this reason, it is important to officially and formally dissolve your entity with the Secretary of State in order to avoid any obligations your company incurs simply by virtue of its existence, regardless of actual business activity.
To end the existence of a corporation or LLC, an entity must file Articles of Dissolution or other form of dissolution or cancellation documents with the Secretary of State. Requirements vary by jurisdiction. In some states, a simple certificate must be filed; in others, tax clearances and other preliminary procedures must be carried out.
The fact that a corporation has wound up its affairs and has ceased conducting business does not end its legal existence. The corporation may maintain its legal existence and remain active (and potentially liable for annual registration fees and responsible for filing annual reports) until formal dissolution/cancellation documents have been recorded with the Secretary of State.
If you are a shareholder in a corporation (or a member in an LLC) that will no longer continue operations in the upcoming business year, it may be wise to complete the process of dissolving your business. Failure to dissolve a corporation or LLC could result in the following:
The Board of Directors of the corporation must first propose a corporate dissolution. Corporate minutes must be recorded and maintained in the corporate book by the corporation's secretary. If shares have been issued, then once the board proposal has been recorded, a majority of shareholders must approve the dissolution action as proposed by the Board of Directors. Please note that some states require that at least two thirds of all voting shares must approve the proposed action for corporate dissolution.
If shares have not been issued, most states allow the Board of Directors to approve of dissolution.
Since laws regarding corporate dissolution vary by state, we strongly urge you to consult with an attorney regarding your state's particular requirements for your situation. Generally, however, most states require, at minimum, the filing of Articles of Dissolution or a similar document. In addition, some states require the filing of a Statement of Intent to Dissolve prior to or concurrent with the Articles of Dissolution. Also, many states require—prior to the filing of ANY formal dissolution documents—a tax clearance from that particular state's tax board. In addition to preparing your Articles of Dissolution, we will instruct you in regards to any state tax clearance requirements within your home jurisdiction.
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