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Closed for Business: How to Correctly Dissolve Your Company

Businesses close for many reasons, but simply shutting the doors does not result in the end of your corporation or LLC. If your business is no longer operating, it is critical that you take the necessary steps to officially dissolve your company within the state. Until the Secretary of State’s office is aware that your company is no longer in operation, you are still liable for annual report filings, tax payments, and other obligations.

How to Dissolve a Company

Although many individuals will simply let the state dissolve their company involuntarily after three years of inaction, such a strategy could create a number of problems, including personal liability for judgments against the business and/or expensive state-assessed penalties and fees.

The best way to put a stop to these obligations is to file Articles of Dissolution with the state. By doing so, you will end your company’s existence in your state of incorporation as well as any other states where you are qualified to do business. Formal dissolution also gives you the chance to tie up other loose ends that your business may have. In Louisiana, the Secretary of State permits two forms of dissolution: short form dissolution and long-form dissolution.

What is Short-Form Dissolution?

Short-form dissolution provides that after you and your members/shareholders authorize dissolution, you will proceed directly to filing an affidavit to dissolve your business with the Secretary of State. This affidavit contains a simple statement that your company is no longer doing business, owes no debts and owns no immovable property. It is important to understand that under this form of dissolution, the members/shareholders will be personally liable for any debts or claims that may arise. Therefore, it is important that you confirm that there are no outstanding debts or claims before filing for short-form dissolution.

What is Long-Form Dissolution?

For long-form dissolutions, after you and your members/shareholders authorize dissolution, the company will need to appoint a person to act as a “liquidator” for the company. Generally speaking, all the rights, powers and duties of the officers and board of directors are transferred to the liquidator and, unless the liquidator decides otherwise, the authority and duties of the officers and directors end when the liquidator is appointed. However, appointment of the liquidator will not be operative until two tasks are completed: publishing a notice of the authorization of dissolution and filing a certificate of dissolution with Secretary of State. The published notice must state that the company is to be liquidated out of court, give the name and postal address of each liquidator, and appear at least once in a newspaper of general circulation in the parish in which the company’s registered office is located.

What Happens Next?

After you have published the notice of dissolution for your company and filed a certificate of dissolution, a copy of the notice dissolution, and the publisher’s affidavit with the Secretary of State, the liquidator can proceed with liquidating your company. When the liquidator has completed liquidation, he or she will need to sign a liquidator certificate and submit it to the Secretary of State. Once the Secretary of State processes the liquidator’s certificate, they will send back a certificate of dissolution. By choosing the long-form dissolution process, members/shareholders are prevented from being held personally liable for any debts or claims that may arise.

Need to Dissolve a Business in Louisiana? Call Chehardy Sherman Williams (504) 833-5600.

If you have a business that needs to be dissolved, or if you have any further questions concerning the dissolution process or other corporate law matters, please attorney Ryan Monsour at rpm@chehardy.com. You may also contact Chehardy Sherman Williams online or call (504) 833-5600 to request a consultation.