Laws About Closing a C Corporation in Ohio

by Terry Masters

The business services section of the website for the Ohio Secretary of State provides a wealth of step-by-step instructions for starting up a corporation, but relatively little information about closing one down. Like most states, Ohio apparently figures that existing business owners are savvy enough to figure out how to close down operations with limited guidance. To determine the proper way to close down a corporation in Ohio and ensure that the shareholders are not held personally liable for obligations that arise after the doors close, the corporation must refer directly to the dissolution and winding up provisions of the state's corporation statute.

Legal Basis

Ohio corporations file articles of incorporation to register with the state and retain active status as long as the registration remains valid. A corporation with an active state registration remains liable for subsequent business obligations, such as taxes and annual state assessments, even if the shareholders are no longer actively running the company. To close down a corporation, it is not sufficient to just shut the doors and put up a sign. The owners of the corporation must follow the dissolution and winding up provisions of state law. In Ohio, those provisions are contained in the General Corporation Law of the Ohio Revised Statutes.

Authorization

Ohio law requires the appropriate authorized parties to adopt a resolution to dissolve the company. The authorized parties will either be the incorporators, board of directors or shareholders, depending upon the corporation's bylaws and status. A corporation that has filed its articles, but has not commenced business or issued authorized shares of stock, can be dissolved by a majority vote of the incorporators. A corporation that has commenced business, but has suspended operations because of bankruptcy, a judicial proceeding to disburse assets, the cancellation of its state registration for failure to pay state taxes or the expiration of its stated term of existence, can be dissolved by a majority vote of the board of directors. An operational corporation can be dissolved upon adoption of a resolution by two-thirds of the shareholders holding voting shares.

Dissolution

Pursuant to a properly authorized resolution for dissolution, the corporation must file a certificate of dissolution with the business services section of the Ohio Secretary of State's office. The secretary's website provides a downloadable certificate of dissolution template. The certificate must indicate how the resolution for dissolution was adopted and the name and address of a statutory agent who will answer questions about the corporation's affairs after dissolution. Ohio law requires a dissolving corporation to attach clearance certificates from various state agencies or an affidavit to prove that all taxes and other amounts owed to the state have been paid. The certificate of dissolution must be signed by an authorized party and submitted by mail with the appropriate filing fee.

Winding Up

The company must also wind up its affairs in accordance with the law. First, it must provide notice of its dissolution to the public and known creditors. The public notice must be published for two consecutive weeks in a newspaper of general circulation in the county where the corporation has its principal office. Creditors must be informed of the dissolution in person or by mail. Demands made by creditors or other parties for payment of obligations that the corporation acknowledges must be prioritized and paid. If the corporation has assets remaining after all debts have been paid, they should be distributed to shareholders in accordance with the bylaws. If the corporation does not have enough assets to satisfy all obligations, it can apply to the court to supervise winding up and to effect an equitable disbursement of assets.