Many steps are necessary when dissolving a business in New York
All good things must come to an end, or so the saying goes. The same is true for most businesses and companies and, sometimes, the end is not pretty. However, a dissolution does not have to be a devastating experience and, if executed properly, the parties involved can emerge from the experience relatively unscathed.
There are many reasons why businesses dissolve, including the following:
- Incapacity or death of a key stakeholder.
- Failure to properly execute a business succession plan.
- Changes in the market or economy make the business impractical.
- Irreconcilable differences between co-owners.
- Business partners decide to retire or go pursue other options.
No matter the reason, when facing a business dissolution, it is important to comply with legal and financial obligations in order to protect business assets and avoid unnecessary losses.
Steps for dissolving a business
Whether you are involved in a partnership, limited liability company, corporation or other type of business entity, many of the required steps for winding down your business are similar.
- Set-up documentation: First, refer to initial set-up documents for your entity to assess what must be done to legally wind-down your business affairs. A vote by officers or stockholders may be necessary before you can proceed, and you will need to following varying procedures depending on what type of entity you formed.
- Filings with the state: Most states have specific forms that must be submitted prior to or during a dissolution. You should also cancel licenses and permits held by your business or specific employees.
- Notification: After notifying employees and stakeholders of your intent to dissolve, you will also need to notify vendors, customers, creditors, banks and service providers. Some states require publication in a local newspaper in order to provide constructive notice to potential creditors.
- Creditor claims: Financial liability often continues despite closing the doors and walking away from your business. Business owners have specific notification and repayment obligations to creditors and service providers.
- Taxes: Your business is still liable for current and past year’s taxes and it is vital to comply with filing requirements. These may include income, payroll and sales tax filings with both the state and the Internal Revenue Service (IRS).
These pointers are merely a sample of what must be done when closing the doors to a business. If you are facing or considering dissolving a business entity, consult an experienced business law attorney. A lawyer knowledgeable about state specific requirements for your entity can help you properly end your financial, legal and ethical obligations as you move on.