Dissolving a Corporation

If you want to distribute any corporate assets to shareholders you will need to formally dissolve your corporation and wind up its affairs. You may also want to formally dissolve your corporation if you are concerned about potential future liability from the corporation's products or services.

The legal effect of dissolution varies among states. In states that follow the Revised Model Business Corporation Act ("Revised Model Act"), a dissolved corporation continues its corporate existence but can no longer conduct any business except that necessary to wind up its affairs. The winding-up process includes the following actions by the corporation:

  • Collection and sale of assets that the corporation does not intend to distribute to shareholders.

  • Notification of corporate creditors of dissolution.

  • Payment of claims.

  • Distribution of remaining assets to shareholders.

In states that follow the Model Business Corporation Act, dissolution ends the existence of the corporation except for lawsuits against the corporation and certain shareholder corporate actions. Dissolution does not occur until after the winding-up process is completed.

The corporation must file IRS Form 966 (pdf) within 30 days after the adoption of a resolution or plan to dissolve.

Dissolution of a corporation involves the following:

  1. Corporate Action

  2. Filing with State

  3. Notification to Creditors

  4. Handling Creditors' Claims

  5. Distribution of Remaining Assets