How to Close an Ohio Incorporation

By David Carnes

Since a corporation is treated as an independent entity under Ohio law, closing one is not as simple as locking the doors and walking away. The corporation's accounts must be squared, taxation and administrative authorities must be satisfied, and surplus assets must be distributed to shareholders before the corporation will be considered legally dissolved. Failure to follow appropriate procedures can result in legal liability for shareholders, directors and officers. Fortunately, Ohio's voluntary corporate dissolution procedures are not unreasonably complicated.

Since a corporation is treated as an independent entity under Ohio law, closing one is not as simple as locking the doors and walking away. The corporation's accounts must be squared, taxation and administrative authorities must be satisfied, and surplus assets must be distributed to shareholders before the corporation will be considered legally dissolved. Failure to follow appropriate procedures can result in legal liability for shareholders, directors and officers. Fortunately, Ohio's voluntary corporate dissolution procedures are not unreasonably complicated.

Winding Up

Step 1

Hold a shareholders' meeting at which shareholders approve a resolution to dissolve the corporation. Under Ohio law, the resolution must be approved by two-thirds of the total shareholder voting power, unless the corporate bylaws state otherwise.

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Step 2

Liquidate all non-cash corporate assets by selling them for cash. Although this is not an absolute requirement, it is likely that corporate creditors and shareholders would prefer to be paid in cash rather than assets.

Step 3

Pay all corporate debts. This includes employee paychecks, debts to suppliers and loans granted by financial institutions.

Step 4

Distribute any excess funds to shareholders in the manner stated in the corporate bylaws or, if corporate bylaws contain no such statement, in proportion to each shareholder's shareholding percentage.

Filing Dissolution Paperwork

Step 1

Submit a Certificate of Dissolution to the Ohio Secretary of State. The Certificate of Dissolution is five pages long and requires basic information about the corporation and its dissolution, such as the date of dissolution and the names and addresses of corporate officers and directors. You can download the form on the Ohio Secretary of State website. Simply go to the website and click on "Business Services" and then on "Forms and Filing" from the pull-down menu. Click on "Certificate of Dissolution" from the list of forms. Fill it out and mail it to the address indicated on the form along with the appropriate filing fee.

Step 2

File an Ohio exit income tax form and a final franchise tax return with the Ohio Department of Taxation. The exit income tax return is one page long and simply notifies Ohio taxation authorities that the corporation is dissolving. The franchise tax return is the standard Ohio for-profit corporate income tax return. Both forms are available on the Ohio Department of Taxation website. To find the exit income tax form, click on "Businesses" at the top of the page and then on "Closing a Business" from the resource list. There is a link to the form on the next page.

Step 3

File a Notice of Dissolution with the Ohio Department of Taxation. This form is available on Ohio Department of Taxation website. The Notice of Dissolution is three pages long and requires basic information about the corporation, including its business locations and the names and addresses of its officers.

Step 4

File a final federal corporate income tax return (Form 1120 or Form 1120S) with the IRS. Depending on the corporation's financial transactions, it may have to file other forms as well; for example, it may have to report capital gains on the sale of business assets.

Step 5

File Form 966 with the IRS to report the corporation's dissolution. Form 966 is one page long and requires only basic information.

Step 6

Write to the IRS at Internal Revenue Service, Cincinnati, Ohio 45999 and ask it to close the corporation's EIN business account.

Step 7

Cancel any business licenses held in the name of the corporation, and close any corporate bank accounts.

Step 8

Submit dissolution statements to the Secretary of State of every other state in which the corporation is authorized to do business. These forms vary by state.

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How to Dissolve a Corporation & Form a New One

References

Resources

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Dissolution of Incorporation

In some cases, dissolving a corporation is more complicated than setting one up. A corporation that is winding down operations must follow state law on business dissolution. This usually involves filing the proper articles with a business regulator, often the secretary of state or division of corporations. There are requirements on final reports, tax returns, distribution of assets and the redemption of shares.

What Does Dissolved Mean for a Corporation?

A corporation is an independent legal entity, separate from its owners, who are known as shareholders. It is this independence that affords the shareholders limited liability for the debts of the company and enables them to easily transfer their shares in the business. But when a corporation decides to cease operations, or dissolve, it must undergo a process to terminate its independent legal status. Corporations are regulated under state law, so the dissolution process can vary. However, there are some general steps that all corporations must take.

How Do I Dissolve a Corporation in Delaware?

Dissolving a Delaware corporation requires filing the appropriate certificate of dissolution with the Department of State. A corporation that was engaged in business and paid more than the minimum Delaware corporate tax must file Dissolution - Section 275. If your corporation did not start business, did not issue shares or was required to pay only the minimum corporate tax, you can file a short-form certificate. The Department of State provides sample forms for each type of certificate of dissolution.

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