Dissolving a business is not as easy as simply closing your doors and calling it a day; there are various legal steps that you must take to wind up and close your business. When you don’t formally dissolve your business, you could be responsible for annual fees and taxes. Read on to learn how to properly dissolve your New York business.
The initial step, of course is to make the choice to close. Naturally, you have already contemplated filing for bankruptcy, selling or transferring ownership before you decide to close.
Step 1: Get approval
If you’re a sole proprietor and are ready to cease operations, then you can close all on your own. However, if you’re another type of entity, such as a partnership, you must obtain approval from the business owners or members to dissolve the business. Additionally, with an LLC or corporation, you will be responsible for annual fees, and filing and paying taxes; failure to dissolve the company subjects you to every creditor, making you vulnerable to potential litigation.
Step 2: Prepare dissolution documents
After gaining approval, the next step is to prepare the dissolution documents and file them with the state. This includes a certificate of dissolution, that you should file in all states where you are registered to do business. Whether it’s a NY State corporation, a Foreign Business Corporation, or a NY State Non-For-Profit Corporation will determine the type of documentation involved. This may include a Certificate of Dissolution with the New York Department of State, a Certificate of Surrender of Authority to Collect Sales Tax. Also, contact the IRS to inform them that you have dissolved your business.
Step 3: Resolve obligations
This includes settling debts with creditors, who have a limited time to file claims and collect debts, resolving financial obligations to landlords and customers and informing suppliers and vendors of the impending closure. You must also resolve all taxes, including filing a final business tax return.
Step 4: Prepare cancellations
Making certain cancellations (such as seller’s permits, business licenses, dba statements, and fictitious names) will help to protect your company’s reputation and finances after you close the business.
Step 5: Check local, state, and federal labor/employment/business laws
Ensure that you’re in compliance with all your local, state, and federal labor and employment laws. For instance, you might have a legal duty to inform employees if the dissolution will result in layoffs. And check for laws that specify the requirements for maintaining records that can help shield you from future audits and litigation.
Step 6: Distribute the assets to the owners/members
Give business assets to the appropriate owners or members. Each owner/member is legally entitled to their share after the creditors have been paid.
Reach Out to a NY Business Attorney Today
While it may be simple enough to take steps to dissolve your business, you may need the guidance of a skilled business attorney to assist with the process. Maybe there’s disagreement with owners about what they should receive or there are problems with your creditors. A MOWK Law attorney can work with you to help resolve the issues. Get a handle on your New York business law needs, and contact us today.