The Twelfth in a Series of Articles for Entrepreneurs
by Bukre Ayan
Things may not go well, and you may end up deciding to close your business. The process of officially ending the existence of a NY business is called dissolution. This article will discuss the steps you need to follow to formally close/dissolve your NY business you operate under an LLC or a Corporation.
Dissolution Meeting – Before you start, check the written agreements of the business. You most likely need an official meeting of LLC members or corporation shareholders (i.e., the owners of those businesses) to approve the dissolution. The procedures you need to follow before or during those meetings like the notice or quorum requirements should be provided in the operating agreements of LLCs and the bylaws of Corporations. Unless those written agreements provide otherwise, the shareholders of the corporations and the members of the LLCs can bypass the formal meeting requirements by voting for dissolution in writing. If your operating agreement or bylaws doesn’t provide about the dissolution procedures, then the NY statutory laws apply.
LLC – Corporation Dissolution Filings – As a NY State registered business owner, you must notify the government agencies that you dissolve your business. Otherwise, you may be subject to ongoing requirements such as tax returns. Also, if your NY entity was registered to do business in another state, you must notify the appropriate state agency to terminate your existence in that state.
LLCs must submit their completed articles of dissolution form together with the required fees to the NY Department of State (NY DOS). Corporations must first file a ‘final’ tax return with the NYS Tax Department. If the corporation is up to date with its returns and taxes, the Tax Department will provide its written consent to the corporation’s dissolution. If your corporation has done business in NY City, you must also obtain the New York City Commissioner of Finance’s written consent to the dissolution. The corporation can then submit their completed certificate of dissolution form together with the required fees and the written consents they obtained.
Winding up Your Business – After the dissolution filing with the NY DOS, the winding up tasks should be completed. The winding up tasks may include but are not limited to, canceling your business’s registrations, permits, and licenses, paying off its debts, selling its assets, or distributing them to the owners. Adopting winding-up resolutions at the dissolution meeting to have certainty about, for example, who will be responsible for the tasks, or how the assets will be sold or distributed, may help the owners of the companies to expedite the winding-up procedures.
Tax Returns – After winding up, the businesses must file their final tax returns with the IRS. Also, LLCs must file their final tax returns with the NYS Tax Department. If your business was registered to do business in another state, do not forget to check that state’s requirements regarding the final tax returns.
Business Sales – Dissolution – When you sell your business with a business assets sale, you most likely end up dissolving your entity after the close of the purchase. New owners usually prefer to form a new entity and operate the business under this new entity. This will help to protect the new business owner from the debts and liabilities of the predecessor. As the seller, you will retain the responsibility for the payments of the debts and liabilities incurred during your operation. To dissolve your business after the sale, you should follow the steps described above.
Photo of two women looking at a laptop by Christina Morillo and photo of two women having a meeting by Kampus Production from www.pexels.com
(This article is the twelfth and the last in our Series of Articles for Entrepreneurs. To see the previous articles, please visit our website at https://www.reedbusinesslaw.com). Please be advised that this article is not intended to provide you with any legal advice, and prior results do not guarantee a similar outcome.
I am an international associate with the firm of Reed CNY Business Law, admitted to practice law in New York and Turkey, specializing in business, immigration, and real estate law. Spanish translations of this series are provided by Ms. Sylvia Espinosa, our firm’s legal intern from Mexico. Reed CNY Business Law represents individuals and businesses throughout Central New York and around the world. Contact us at firstname.lastname@example.org or sespinosa@ReedBusinessLaw.com.