Dissolving a business is sometimes necessary . The process for dissolving a business depends on many factors, including the type of entity and why the dissolution is occurring. Working with a business attorney can help you protect yourself and navigate the process smoothly.
The New York City business attorneys at Woods Lonergan PLLC have extensive experience helping clients dissolve businesses. Our attorneys have an in-depth knowledge of New York business law. We use this knowledge to work diligently to obtain the best outcome possible for our clients. Contact us today to schedule your initial consultation and learn more about our business law firm.
Dissolution of a Corporation By Proclamation
Not all businesses are dissolved voluntarily. The New York secretary of state has the authority to dissolve a corporation for failure to file franchise tax returns or pay franchise taxes for two or more years. Once a business has been dissolved by proclamation, it will cease to exist. Unlike with a voluntary dissolution, in the case of dissolution by proclamation, the corporation will be required to keep filing and paying its tax returns until it is voluntarily dissolved or reinstated.
Dissolving a Business Voluntarily
Businesses can typically be dissolved at any time. Once the dissolving of a business has been finalized, the business will no longer exist. Business dissolutions can occur voluntarily or by proclamation. Even after a dissolution occurs, certain legal requirements remain. The first step when dissolving a business is to make a formal declaration of one’s intention to dissolve the business.
If you own an LLC, all of the members of the LLC must vote to dissolve the business according to your operating agreement. If you own a corporation, you will need the written consent of the shareholders or to approve the dissolution with a shareholder vote.
Obtain The Tax Department’s Consent
You will need to obtain consent to dissolve your business from the Department of Taxation and Finance. When you file the corporate tax return, you must indicate that the return will be the corporation’s final tax return. Next, the Department of Taxation and Finance will determine whether your corporation has any back taxes and ensure that all of your tax returns have been filed.
If the Department of Taxation and Finance determines that everything is up to date, they will issue your corporation consent to dissolve. When dissolving an LLC, you will not need to seek and obtain consent from the Department of Taxation and Finance to dissolve your LLC. Only corporations have an obligation to obtain the tax department’s consent to dissolve the corporation.
Dissolving A Business With New York’s Department of State
Finally, you will need to file for dissolution with the Department of State. When you file for dissolution as a corporation, you must include the Certificate of Dissolution. You will also need to include two copies of the Department of Taxation and Finance’s written consent. If you’re filing as an LLC, you’ll need to complete the LLC Articles of Dissolution.
For corporations and LLCs, you will need to include the filing fee. Once the paperwork has been processed with the Department of State, the business will be dissolved. The filer will receive a filing receipt as proof that the business has been dissolved.
Dissolving A Business: Partnership Dissolution
When partners or shareholders in a business or commercial entity cannot resolve a dispute, they may need to dissolve the partnership. The process for dissolving a partnership depends on the partnership agreement. A partnership agreement should include details about how disputes should be resolved and how the partner should dissolve the partnership, if necessary. Not all businesses have strong exit plans or strategies in place, so dividing the assets and deciding whether to buy out a partner share can be complicated. A court will dissolve a New York partnership when:
- A partner has been declared incompetent by a court proceeding or is of unsound mind
- A partner becomes incapable of performing his or her duties under the contract
- A partner has been found guilty of conduct that prejudicially affects carrying on
- A partner willfully and persistently breaches the partnership agreement
- The partnership’s business can only be carried on at a loss
- Other circumstances that make dissolving the partnership equitable
At Woods Lonergan, our attorneys work with businesses throughout the New York metropolitan area to reach agreements in the best interest of our clients. We can evaluate the situation and help you dissolve your partnership in a way that protects yourself and your assets. If you want to restructure a partnership, we can help you implement exit strategies.
If there is a buyout of remaining partners, we can also help you resolve any pending litigation issues related to breach of contract or other disputes between the partners. Finally, we can help you dissolve the partnership.
Involuntary Dissolution of a Corporation
There are two types of dissolution for corporations, voluntary dissolution, and involuntary dissolution. Involuntary dissolution requires a court proceeding involving a deadlock among shareholders when there are special circumstances. When 50% or more of the voting shares decide to dissolve, the court will dissolve the business when the shareholders are so divided that:
- The votes for action by the board of directors can’t be obtained
- The votes required for the election of directors cannot be obtained, or
- There is internal dissension and two or more shareholder factions are so divided that dissolution would be beneficial to the shareholders
Reinstating a Corporation
After a business has been dissolved, the owner may decide to open the business back up. New York has a procedure for reinstating a corporation. The corporation will be required to pay any fees or penalties, file any outstanding tax returns, and pay any back taxes. Once it is up to date on payments, the Department of Taxation and Finance can issue written consent for reinstatement. The filer will need to pay the filing fee and file a Certificate of Payment of Taxes, and once the paperwork has been processed, the corporation will be reinstated.
Contact an NYC Business Attorney
If you would like to dissolve your business, or you’re already in the process of doing so and need legal advice, Woods Lonergan is here to help. Contact us today to learn more about our business dissolution services.