Notifying creditors of the dissolution of a business is a crucial step in the process of closing your doors. Creditors to your business are people or business entities that are owed money, and you must give them the chance to make claims before the business is dissolved.

How to Notify Unsecured Creditors of Dissolution

An unsecured creditor is a person or entity that loaned your business money without securing collateral. Unsecured creditors are at a higher risk than secured creditors because if your business was to default on their loan, the creditor wouldn’t have financial assets to resort to.


Material and inventory suppliers are main examples of unsecured creditors for businesses. In the case of dissolution, you’ll need to provide them with the following information in an official notice:


1. The date of the final delivery

2. Whether or not any goods will be returned

3. The date and method for payment for all supplied goods or materials


Once the decision to dissolve your business has been made official, be very careful with the amount of materials or goods that you have delivered. Do your best not to order more than the business will use in the time before closure. If you’ll still need goods delivered up until the date that your business closes its doors, inform your suppliers of the dissolution on the final week of operation.

How to Notify Secured Creditors of Dissolution

In contrast to unsecured creditors, secured creditors obtain collateral for loans made to individuals or businesses. For instance, you may be using a car for business operations and make loan payments on it. In this case, you could return the car to the creditor, or you could sell it and give the money from the sale to the creditor.


With a secured loan, there could be a deficiency – this means that you’ll need to pay the difference between what the item ultimately sold for and the amount of your loan on it. You can try to get a signed document from the creditor stating that no money is owed on the debt to lessen your odds of having to pay a deficiency.

Notifying Creditors as an LLC or Corporation

LLCs and corporations are different from partnerships and sole proprietorships in that they can set a deadline for creditors to make claims in the case of dissolution. In your notice to creditors as an LLC or corporation, you’ll need to provide the following information:


1. The deadline for creditors to submit claims by (typically 90 to 180 days, depending on which state your business operates in)

2. A statement reading that claims received after the deadline will be barred

3. A mailing address to which creditors can send their claims


Creditors who aren’t notified of your business’ dissolution and their right to make claims may be able to send in claims after the deadline. Due to the fact that the creditor wasn’t notified of the dissolution, you may still be legally obligated to pay their claim.


To avoid this situation, you can publish a dissolution notice for unknown creditors on your website and in local publications. This notice should contain all of the information sent to known creditors. Unknown creditors can typically still send in claims within two to five years, depending on your state laws.

Notifying Creditors as a Partnership or Sole Proprietorship

If your business is a partnership or sole proprietorship, you can send out a notice to known creditors informing them of the dissolution. A short notice may also be published in your local newspaper. If a creditor isn’t paid, they can file a lawsuit within the time window specified in the statute of limitations in your state, which is generally three to ten years.


Sending the notice of dissolution to creditors as a partnership or sole proprietorship can lower your risk of getting sued down the line. But, if you don’t want to encourage creditors to make a claim and you believe the risk for a lawsuit is low, you’re not required to send out notices.


Informing creditors of the dissolution of your business is far more straightforward than many people think. But, if you’re concerned over your risk of legal liability, contact an attorney to help you through the process.