There may come a time when it is impossible for the owners of a business to carry it forward. But what should be done with the entity you have spent years building?
One outcome is to sell the business. The owners will have to determine a value and be prepared to support it to a potential buyer. In some cases, one or more current owners may buy the departing owner’s stake and continue the business; in others there is an outright sale of the stock or the assets to a new party.
If a sale is not going to occur, and the business is not going to continue but has a positive value, then a dissolution and winding up of the business becomes more likely.
When proceeding with a voluntary dissolution, the owners should execute an agreement that addresses, at a minimum:
– what happens with any remaining assets;
– what the liabilities are and how they are going to be addressed; and
– distribution of the proceeds.
Articles of Dissolution then should be filed with the Secretary of State to terminate the existence of the business. Filing the Articles of Dissolution requires the owners to certify an absence of liabilities.
If Articles of Dissolution are not filed and the annual fees remain unpaid, the Secretary of State will involuntarily dissolve the company. Involuntary dissolution will increase the statute of limitations for claims against the business, and may compromise the limited liability attributes of the company should any claims arise.
A business entity reflects years of effort, and preparing to close it down can be a monumental decision. But if that is on the horizon, consider how best to maximize the return on what was built.