Disolving a Corporation Resolution - By David Gass

Writing corporate resolutions should be simple and contain language adequate enough to show that the board of directors exercised its legal duty of care and loyalty. Resolutions should reflect meetings or written consent soon after the agreed upon actions happen.

Making the decision to dissolve a corporation is the best thing for your small business can be a perplexing task and a tough decision.

There are two major Acts that state the necessary legal steps for dissolving a corporation, they are:

• Model Business Corporation Act (MBCA)
• Revised Model Act

Each contain some of the same fundamental legal requirements, but the steps that take place are in a different order.

The Model Business Corporation Act requires a corporation to file a declaration of intent to dissolve before starting the winding-up process. After that procedure, only then can the corporation file the articles of dissolution. The Revised Model Act, used by numerous states, allows a corporation to file articles of dissolution prior to commencement of the winding-up process. Before voting to dissolve a corporation, get in touch with a legal representative who can advise you as to which Act is followed in your individual state.

For states that function under the Revised Model Act, which allows dissolution articles to be filed prior to winding-up, a dissolved corporation can continue its corporate existence but can no longer hold any business activities except what is necessary to finish up its affairs. Once the winding-up process is completed, the corporation's life is considered dissolved.

In cases where the state follows the Model Act, which does not allow dissolution articles to be filed prior to winding-up, dissolution articles officially end the life of the corporation. In addition, IRS Form 966 must be filed within 30 days after the arrangement of dissolution is adopted by the shareholders, and the statement of intent must be filed prior to the winding-up process.

For all states, the winding-up process, whether allowed before or after the articles of dissolution are filed, is the same. First, the collection and sale of assets that the corporation does not propose to distribute to shareholders must be handled. Then, all corporate creditors must be notified of the dissolution. Once there has been adequate time for the creditors to respond, all claims must be paid in full. At that time, the distribution of the remaining assets to shareholders may take place. For all states, this is the fundamental order of operations that you should expect to abide by when beginning your dissolution process.

In addition to all of the standardized practices, each individual state has the liberty to amend the Acts by adding additional requirements. For example, some states require that a corporation file a statement from the state-taxing agency verifying that the corporation is up to date on all state taxes. For this reason, it is important to involve a legal advisor in the dissolution process. You do not necessarily need the legal advisor to handle the actual dissolution (most necessary forms can be effortlessly accessed and filled out by shareholders), but it will be worth the financial expense to meet with someone and verify you are taking all required legal steps in accordance with your particular state's specific laws.

As a general rule all records, resolutions and recorded minutes of your corporation should be kept for a period of no less than six years.

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