During these unprecedented times, New York business owners may find themselves having to make the difficult decision to shut down their business. The process of dissolving a business will depend on the structure of the business and state law, but there are some general guidelines that all business owners should be aware of.
Abide by your business operating agreement
Limited liability companies, corporations, and some partnerships, have written agreements, articles of incorporation, or state laws specifying the requirements to dissolve a business. Generally, there will be a vote among the shareholders, and a two-thirds or majority must vote ‘yes’ on dissolving the business before it can occur.
However, with sole proprietorships and general partnerships without a written agreement, you are generally permitted to shut down the business whenever you want, or walk away from the partnership easily by giving notice to your partner.
File dissolution documents with the state and pay filing fee
Unless you are a sole proprietor, you will have to file dissolution papers to certify the termination of your business. This will make creditors aware that the business cannot incur additional debts and partners will be stopped from burdening the partnership with additional debt.
Notify the IRS and your creditors
You will need to file your final business tax returns and mark checkboxes to inform the IRS that these are the last returns that will be filed by the business.
You will need to let your creditors know that your business is shutting down and provide them with a deadline to submit claims. Assuming the claims you receive are valid, you will have to pay your debt in full or work out a deal with the creditor.
Distribute the assets
Once you have paid off your creditor claims, you will be able to sell and distribute both tangible and intangible assets. The assets will be split among the owners based on how much stake each owner has in the business.
Dissolving a business can be complicated and it can be easy to overlook certain parts of the process. A business and commercial law attorney in your area can get into the specifics of dissolving your business and make sure you don’t miss any important steps along the way.