Dissolving and winding up a corporation is not difficult, but the steps must be followed very carefully. While it is possible to complete the process on your own, you would be well advised to retain the services of an attorney versed in the process to ensure that everything that must be filed is filed… correctly and on time. The basics are as follows:
Vote of Shareholders or Directors
• Shareholders holding at least 50% of the voting shares of the corporation may elect to voluntarily dissolve and wind up the corporation at any time. This may be accomplished either by a formal resolution at a shareholders meeting or, as is more commonly the case, by written consent.
• If the corporation has issued no shares, i.e., it has no shareholders, the Board of Directors may also elect to dissolve the corporation by a majority vote of the Board. A formal resolution of the directors is required. The resolution should state all of the facts necessary to establish that the Board has the authority to commence dissolution, i.e., that no shares have been issued, et cetera.
Filing of Certificate(s) with the Secretary of State
The corporation is required to promptly file with the California Secretary of State a certificate or certificates evidencing its election to dissolve.
• Certificate of Dissolution – Must be signed under penalty of perjury by a majority of the directors then in office.
• Certificate of Election to Wind Up and Dissolve – Must be signed under penalty of perjury by (1) a majority of the directors or (2) shareholder(s) holding shares representing 50 percent or more of the voting power of the corporation. This certificate is not required if the election to dissolve was made by a vote of all of the outstanding shares of the corporation.
Notice
Promptly following the commencement of voluntary dissolution proceedings, the Board of Directors must mail notice to
• All known creditors and/or claimants; and
• All shareholders who did not vote in favor of dissolution or sign giving consent.
Tax Filings
• Federal Income Tax | IRS Form 966 – Within 30 days of adopting a resolution to dissolve, the corporation must file an IRS Form 966 with the Internal Revenue Service. A copy of the shareholders’ or directors’ resolution, certified by an appropriate corporate officer, must accompany the form.
• California Franchise Taxes | Final Return – Within two months and 15 days after the close of the month in which the dissolution took place, the corporation must file its final tax California return with the Franchise Tax Board.
Payment or Provision for Debts
The Board of Directors is responsible for determining that all of the corporation’s known debts and liabilities have been paid or are “adequately provided for” before they may distribute the remaining assets of the corporation, if any.
[Every case is different. Nothing in this post or on this site is, nor is it intended to be, legal advice. Please contact me to obtain legal advice regarding your particular situation. Past achievements are not a predictor of future results, and do not constitute a guarantee, warranty, or prediction regarding the outcome that you can expect. No attorney-client relationship can be or will be established until attorney and client have met, discussed the client’s specific needs and expectations and the attorney’s current fee structure, and attorney and client have both signed a written fee agreement.]