A corporation is a type of limited liability business. The owners are considered separate from the business and shareholders aren’t held responsible for financial business liabilities. For these reasons, many of the most recognizable businesses today are corporations.


If you’re a business owner, the choice to end your corporation can be made for a variety of reasons. But, regardless of why your business is closing its doors, the dissolution process involves multiple steps that you should follow closely. By dissolving your corporation properly, you can avoid legal complications and maintain amicable business relationships.


Follow these steps to legally dissolve a corporation:


Step 1: Hold a vote with the board of directors.

To officially start the process of dissolving a corporation, you need to get the approval of your board of directors. Either a majority or a two-thirds majority is required to officially move forward with the dissolution of a corporation, depending on the state.

After you’ve achieved approval from your board of directors, a written agreement must be signed by all of the corporation owners. Once the agreement has been signed, you can move forward with a request for dissolution.


Step 2: Notify any creditors of the decision to dissolve and settle claims.

If your corporation has creditors, it’s wise to contact them as soon as possible after the dissolution agreement has been signed. This will give you time to receive and settle any claims made against your corporation to avoid legal complications later on.

When you notify creditors of your intent to dissolve the business, you’ll need to provide them with a deadline to submit claims by. Claims received after the specified deadline can be legally barred.


Step 3: File Articles of Dissolution (or a Certificate of Dissolution) in the states that your corporation operates in.

Filing Articles of Dissolution with the secretary of state for each state that your corporation conducts business in is the next step in ending your business. Dissolution paperwork, fees, and the filing process can from state to state.

The paperwork that you need to officially dissolve your corporation can typically be found on your secretary of state’s website. You can also contact the state agency designated to incorporation (typically called an Incorporation Bureau or Corporation Commission) for more information about Articles of Dissolution in your state.


Step 4: File final federal and state tax returns for your corporation.

The next step in the dissolution process is to inform the IRS and state tax agencies that your business will no longer be conducting business. To do this, you’ll need to file a final federal tax return and a final state tax return (for each state in which your corporation pays taxes). Tax return documents include a “Final Return” checkbox that you’ll use to indicate the dissolution of your business.

Note that in some states, you’ll need to pay any back taxes due before filing a final tax return. Refer to the tax clearance and dissolution guidelines for the state(s) in which you conduct business.


Step 5: Cancel any business licenses, contracts, and leases previously obtained by your corporation.

In the process of officially dissolving your corporation, be sure to cancel any business licenses and permits under the company name. Contact the state or city in which you applied for the permit or license to cancel it. If you lease physical property to conduct business operations, contact your property owner if your lease will extend past the date of dissolution.


Step 6: Distribute any remaining assets to shareholders.

After paying all claims, taxes, fees, and other expenses associated with the dissolution of your corporation, you can distribute remaining assets to shareholders. Assets are typically distributed according to ownership percentage and may include profits, financial investments, and physical property.


Step 7: Inform clients and employees.

When your corporation is officially coming to an end, be sure to inform your employees and clients of the decision. This will help you end your business while maintaining positive industry relationships while reducing uncertainty within the business.

Dissolving a corporation is undeniably an involved process. But, by carefully following each step in the dissolution process for a corporation, you can have a smooth transition to your next enterprise.