{"id":4653,"date":"2016-04-04T10:47:37","date_gmt":"2016-04-04T15:47:37","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/closing-a-business\/necessary-steps-to-dissolve-your-company.html"},"modified":"2024-05-23T00:56:24","modified_gmt":"2024-05-23T05:56:24","slug":"necessary-steps-to-dissolve-your-company","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/closing-a-business\/necessary-steps-to-dissolve-your-company.html","title":{"rendered":"Necessary Steps To Dissolve Your Company"},"content":{"rendered":"\n
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Necessary Steps to Dissolving Your Company<\/h1>\n
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\n By Amber Sheppard, Esq.<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

One of the grim statistics of starting a business is knowing that almost half of all small business startups will no longer exist five years later. According to the Small Business Administration<\/a> (SBA), the reasons both big and small businesses fail are as many as the companies themselves. When a company shuts down, it can’t just close the doors one last time and send everyone home. It may take many months or even years to close a business.<\/p>\r\n

This timeline for dissolving, closing, or winding down a business gives business owners some idea of what to expect if their business isn’t successful. No one wants to plan for failure, but business owners should prepare for the worst as they work for success.<\/p>\r\n

Your Business Structure Determines How To Close Your Small Business<\/h2>\r\n

If you’re a sole proprietor<\/a>, you don’t need to worry about closing according to the requirements of business documents. It’s an unwelcome event but a decision you make on your own. You do not need to consult with partners or board members.<\/p>\r\n

If your business is a general partnership that doesn’t have a written partnership agreement, give written notice to your partner. Let them know of your desire to withdraw from the partnership.<\/p>\r\n

Suppose your business has a written partnership agreement, LLC, or a corporation. In that case, you must follow the rules of dissolution<\/a> contained in your business documents. Usually, company documents need a two-thirds or majority vote to dissolve.<\/p>\r\n

These operating documents should be in the company’s records and filed with your state’s secretary of state. If ending the business is what you want to do, be sure to follow the rules to avoid disputes later on. You may need to call a board of directors meeting or make an announcement to shareholders.<\/p>\r\n

The rest of the dissolution process will take time. The actual amount of time depends on your type of business and the reason(s) for dissolution. You can expect it to last at least several months. Having a business checklist can make the process easier.<\/p>\r\n

Steps To Closing Your Business<\/h2>\r\n

The process of closing a business<\/a> mirrors the process of opening one. Like starting a business, ending your business begins by ensuring everyone is on board with the dissolution of the business.<\/p>\r\n

If your company has articles of organization or bylaws, they should include a process for voting on dissolution. If your company does not have this, state laws determine how you need to inform your members and close your business.<\/p>\r\n

Notification of Employees<\/h3>\r\n

The Federal Worker Adjustment and Retraining Notification<\/a> (WARN) Act requires eligible employers to notify employees at least 60 days before mass layoffs or plant closings. The WARN Act does not apply to most small businesses. Many states, such as California, have versions of the act, which may be more restrictive than the federal act.<\/p>\r\n

All states have requirements on when employees must receive their final paycheck following a business closure. In some states, it is the day of notification. Time your closing and notification so you can make payroll and meet all other financial obligations.<\/p>\r\n

Notification of Creditors and Vendors<\/h3>\r\n

Cancel contracts and leases according to their terms. For instance, if you have a lease on your building that requires you to give 60 days’ notice, you must give the landlord 60 days or risk losing any deposit. You are liable for paying costs for breaking the lease.<\/p>\r\n

Contracts for goods or services should have cancellation clauses. They may also have liquidated damages clauses for breach or early termination. As with notifying your employees, give yourself plenty of lead time to cancel any contracts before officially closing your business.<\/p>\r\n

You’ll need to inform lenders, insurers, suppliers, vendors, and service providers that the business will no longer be contracting for their services.<\/p>\r\n

Corporations and LLCs need to inform creditors:<\/p>\r\n