Every business is started with an expectation of glorious success down the road. Alas, the statistics show that most businesses will not make it beyond an initial two year threshold. If you are experiencing a failing business, you will need to know how to file a corporate dissolution.
The formation and termination of business entities are handled at the state level, not the federal level. This can make figuring out a dissolution filing a bit tricky since each state handles things differently. That being said, we can cover the general procedure that most states will stick closely to.
The first issue is whether you should close the business. The fact that the business has failed or is about to usually means that there are creditors looking for payment. A corporation or limited liability company protects the owners of the business from being personally liable for such debts. Depending on your state, dissolving the business entity may open you and the other owners to personal liability. This is why speaking with a business lawyer in your area before you take this step makes a lot of sense.
Assuming you still wish to move forward, the first step to dissolving the entity is to read the bylaws of the corporation or articles of organization of the limited liability company. That document will contain a procedure for the owners to follow to verify that dissolution is the choice. Typical provisions require a majority of the owners to vote in favor of dissolution before it can happen. If so, a meeting will need to be called and a vote taken.
One the vote is taken, we get into practical issues. Your first step should be to contact the Secretary of State. The agency will often have a pre-printed form that you must use to file the dissolution. You can often find the form on their website. Regardless, it is usually free to file and requires only nominal information such as the name of the business, date of filing and person authorized to make the filing. Just fill it out and send it in to the Secretary.
The next step is to prepare your final tax return. This return is necessary because it tells the IRS and your state tax agency that the company is closing down. It also contains the tax information for any company property distributions. In many states, the final tax return must be filed and accepted by the state tax agency before the Secretary of State will accept and file the dissolution notice sent in.
The physical filing of a corporate dissolution is usually not that difficult a task. That being said, it is advisable that you speak with both an attorney and accountant first to make sure that you are not creating more problems than you solve by doing so.