Properly dissolving a corporation requires filing certain paperwork with the IRS and with the state in which your corporation is incorporated. It is important to take all of the required steps, and file all of the required paperwork, because failure to do so could result in the owners or directors of the corporation becoming personally responsible for any lingering debts or liabilities of the corporation. For specifics regarding the exact paperwork and forms that you need to file in your state of incorporation, you may need to to check with the appropriate agency of that particular state government or enlist the assistance of an attorney licensed to practice law in that state.
Resolution of Dissolution
The simplest way to legally dissolve a corporation is for the board of directors to approve a resolution authorizing the dissolution of the corporation. However, if the corporation has issued any stock to shareholders, the shareholders will also have to approve the resolution. State laws often impose specific requirements relating to the method and procedure for obtaining shareholder approval of the resolution authorizing dissolution.
IRS Tax Forms and Payments
The IRS requires dissolving corporations to file any delinquent tax returns before the corporation formally dissolves. For instance, if your corporation has not filed tax returns, or needs to file an amended return, for prior tax years, this must be complete before you dissolve the business. Additionally, you will have to file a final tax return for the current tax year. Finally, the corporation needs to pay all tax balances owed to the IRS, including taxes for the current tax year.
State laws generally require domestic corporations, meaning corporations incorporated in that particular state, to file articles of dissolution with an appropriate branch of the state government. The person filing the articles of dissolution will have to swear, under penalty of perjury, that the board and, if required, shareholders have authorized the filing of the articles. Also, the corporation will need to file a notice of dissolution or similar type of form with each state in which the corporation has registered as a foreign corporation, which generally includes any state in which the corporation conducted business but was not formally incorporated.
Distribute any corporate property out of the name of the corporation. For example, if the corporation owns real estate, the corporation needs to sign a deed of title to transfer ownership out of the corporation. In general, the shareholders will receive a percentage of the corporate property according to the percentage of stock owned by each shareholder. Distribution of property can be a complicated process if the property is extensive and if the corporation has several shareholders.