How to Start a New Business After Dissolving a Corporation

By Brette Sember, J.D.

How to Start a New Business After Dissolving a Corporation

By Brette Sember, J.D.

After you close a corporation, you may eventually find yourself ready to try a new venture and open a new business. Your former corporation was a separate legal entity from its shareholders and owners and, as such, it's legally dead and gone now that it's been dissolved. That means you're free to start another business whenever you'd like, without it having any legal ties to the corporation you closed.

Man in suit leaning against desk in workspace

Forming Your New Business

When you open a new business, you need to decide what type of entity you want it to be: sole proprietorship, partnership, limited liability company (LLC), or another corporation. Once you decide on the type, check your state requirements to determine what, if anything, you need to file with the state to start the new business. Sole proprietorships and partnerships generally have no formation filing requirements, but LLCs and corporations require filing documents and paying fees to your state to get up and running.

You also need to choose a name for your company. It's best not to use the same name as your dissolved corporation, but it's not a problem if it is something similar. They key is to try to prevent confusion for customers and vendors.

Capitalizing Your Business

When your former corporation was dissolved, its debts were paid and any remaining assets were distributed to the shareholders. If you held shares in the corporation, you likely received a distribution. You can use these funds to start your new business, or you can use other funds you have or are able to borrow or receive from investors in your new company. Because you've been in business before, you know what to expect from start-up costs and can plan accordingly.

Rely on Your Experience

Because you've been in business before, you know the ropes for the basics of starting a business, but it's important that this time around you think about how things went with your previous business and what you can do to avoid any of the problems you may have experienced the last time. Because of this, it's a good idea to do a post mortem on your last business. Using an analytical eye, make a list of what worked, what didn't, and how you could improve your own skills and decisions this time around.

Establishing Credit

When you closed your corporation, its credit rating died with it. As the owner of a new business, your personal credit score is key, as is the fact that you closed a previous business. If you are still paying off loans that you personally guaranteed for the old corporation, this could have a significant impact on your ability to take out loans to finance the new business. You may need to use collateral or show that you are investing your own funds into the business to make yourself more attractive to lenders.

 

Setting Up New Accounts

When you dissolved your corporation, you closed all bank accounts and tax accounts—now your new business needs accounts of its own. Once you've handled the formation documents, if any, you can get started opening your bank accounts and applying for a new employer identification number (EIN) from the Internal Revenue Service (IRS). You likely also need to set up a state tax ID and obtain any necessary state licenses.

If you need to close up your corporation before you move on to a new business, you can do this using our online service.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.