Understanding Business Dissolution
Feb. 23, 2022
Making the decision to dissolve your business is no easy undertaking. Businesses can fail for all sorts of reasons, but there’s always one thing that’s the same — the process of dissolution needs to be handled thoroughly and professionally. There are a number of legal responsibilities and following the proper procedure is essential to ensure your finances stay protected.
If you’d like help with your business dissolution, call Engel Professional Association today to set up a consultation to talk through your options. We’ve been helping business owners in Minneapolis, Minnesota, and St. Paul since 1999. Our goal is always to minimize taxes and fees, protect you from creditors, get squared away with the state, and set you up for success in the future.
Reasons for Dissolving a Business
One of the main reasons a business needs to dissolve is due to issues with money. Perhaps your business just isn’t making enough to stay afloat. Maybe a competitor has made your current model unsustainable, or perhaps there’s been a series of poor management decisions that have left your business impossible to keep open. In any of these cases, you may be looking at declaring bankruptcy or you’ve simply made the decision to cut your losses, dissolve your business, and move on to the next phase. Whatever the reason, we’re here to help you do it right.
Dissolving an LLC
If you’re currently a partner in an LLC and have decided to close up shop, there are a number of steps you need to take before you actually dissolve the LLC with the state. Depending on how many members there are in your LLC, you’ll need to take a vote on ending the business. Next, you must notify your creditors that you intend to close your business so you can settle any outstanding debts. Now, you can file your Articles of Dissolution with the state and begin winding up your business. This could include canceling leases, paying and letting go of employees, distributing assets, or voiding contracts. Some states require you to get a tax clearance prior to dissolution, but Minnesota has no such requirement.
Dissolving a Corporation
Dissolving a corporation is similar to an LLC in that you’ll need to hold a formal vote with your board of directors and any shareholders. Only after you’ve obtained corporate approval can you then file your Articles of Dissolution with the state, though you may have to file an Intent to Dissolve if you’ve issued shares. You must then take care of any outstanding liability which could include contacting any claimants and paying debts, paying employees, making final distributions, resolving any lawsuits, and closing all business accounts.
Dissolving a Sole Proprietorship
Because a sole proprietorship only has one member (you), dissolution can be slightly easier and more straightforward. Many people who have a sole proprietorship still file their taxes as an individual (as a pass-through entity) and have therefore not filed any official paperwork with the state. While this will reduce the steps you need to take for dissolution, it can potentially leave you vulnerable to personal liabilities. You will still have to notify the state, pay off outstanding debt, cancel any licenses, and collect on any open accounts.
Let Engel Professional Association Help
You’ve no doubt spent countless hours forming your business, and you should apply the same level of attention to dissolving it as well. If you're looking for a skilled business law attorney to assist you through this process, call us today. Engel Professional Association proudly serves clients in the Minneapolis, Minnesota, area, as well as St. Paul and across Minnesota, including Mankato, Maple Grove, St. Cloud, and Woodbury.