Deciding to close a business is a major step. While you may cease your company's day-to-day operations, there is a crucial final legal requirement: formally closing your business entity with the state. This process is known as dissolution.
Simply abandoning a business without formally dissolving it can lead to significant legal and financial consequences. Dappr offers a Dissolution filing service to handle this essential final step, ensuring your company is closed properly and cleanly.
What is dissolution?
Dissolution is the formal, legal termination of a business entity's existence. It involves filing official paperwork, often called Articles of Dissolution, with the same state agency where your company was originally formed. This filing officially notifies the state that your LLC or Corporation has ceased its operations and is winding up its affairs.
It is important to understand that dissolution is a legal process separate from the operational process of "winding down," which includes activities like selling assets, paying off creditors, and distributing any remaining assets to the owners. The legal filing of dissolution is the final act that officially takes your company off the state's records.
Why formal dissolution is crucial
Many founders assume that if their business stops making money, they can just walk away. This is a dangerous misconception. If you do not formally dissolve your company, the state considers it to be an active entity, regardless of whether it is operational.
Failing to dissolve can lead to serious ongoing liabilities:
Continued Tax Obligations: Your company will still be liable for filing annual tax returns and paying any minimum state franchise taxes, which can accumulate year after year.
Annual Report Fees and Penalties: Most states require an annual report filing with an accompanying fee. Failure to file can result in late fees and penalties that you, as the owner, may become personally liable for.
Loss of Good Standing: An undissolved but inactive company will eventually fall out of "good standing" with the state, which can complicate future business endeavors.
Personal Liability Risk: In some cases, failing to properly dissolve the company could be used to argue that the corporate veil should be pierced, potentially exposing you to personal liability for the company's old debts.
Formal dissolution officially ends your obligation to pay future state taxes and filing fees and provides a clear end date for your business's legal existence.
How to order the dissolution service
Dappr can manage the entire process of preparing and submitting your dissolution filing with the state.
From the main menu, navigate to Business Records.
Select Legal and filing services from the top menu.
Click on the Filing services tab in the sub-menu.
Find the Dissolution service in the list and click the Order button.
You will be guided through a form to provide the necessary information for the filing.
Complete the form and proceed to payment to finalize your order.
Once your order is placed, Dappr will prepare the necessary documents and file them with the appropriate state agency. You can track the progress of your filing from your main Dappr dashboard and in the "Orders" tab of the Legal and filing services page.
Dappr is not a law firm and this content is not legal advice. The process of winding down and dissolving a business has significant legal and tax implications. We strongly recommend consulting with your legal and tax advisors before beginning this process.