Dissolving a failing business is a simple process. However, various factors should be considered when dissolving the business. Business dissolution involves filling dissolution forms from the secretary of state. In addition, if the business is a partnership, the partners must all agree to sign off on the dissolution papers. Here are the steps to be taken when dissolving a failed business.
Examine the business assets
If the business is a partnership, meet with all partners and list all business assets. The amount of debts the business has determines the amount of money that each partner will walk away with. Make a list of all items that have cash value including business buildings, office furniture, stocks, bonds, merchant account and computer equipment among others. Also, make a complete list of all business debts.
Consider undertaking formal dissolution. The company owner must write a formal letter requesting for dissolution. This is usually referred to as Formal Corporate Action. This involves writing a formal statement detailing the agreement of all interested parties that the company will be dissolved. The interested parties may be the company’s board of directors and owners among others. It is important to know that this agreement needs to be filed with your state.
File the dissolution papers with the state. After making the agreement to dissolve the business, contact the secretary of state to obtain dissolution forms. The length of this forms vary. Some states have more detailed dissolution forms than others do. Complete all the forms as required. Make sure all the business owners sign the form. You may be charged a small fee for the forms. The fee is determined by the state.
File proper forms with the IRS. This may involve signing the IRS Form 966 or the Corporate Dissolution and Liquidation form. By signing the IRS Form 966, partners who decide to divide their business assets are subject to income taxes. Business owners who decide to dissolve their businesses are subject to additional requirements set by the IRS.
Send a notice to your creditors. After dissolving the business, you are required to notify your creditors how they can reach you. This requires you to notify your attorney to draft a Statutory Notice and send it to all creditors.
The notice will inform creditors that you are in the process of dissolving your business and making payments to all creditors. Include your contact details such as your address, telephone number and email address where your creditors can reach you. Work out a plan with each creditor on how you will pay them back. Find out if any of the creditors can accept credit cards. Finally, liquidate your business assets.