There are as many valid reasons to wind down a company as there are to start one in the first place. It might be time to move on to a new venture or close up shop due to a lack of success. In either scenario, it is important to follow the proper procedure for dissolving a corporate entity to minimize liability for the owners.
When you are in this position, a skilled business attorney may be able to help. From the early stages of winding down business activities to fully dissolving the entity, a San Antonio business dissolution lawyer could provide crucial legal guidance and support.
A business entity in San Antonio, or anywhere in Texas, cannot dissolve arbitrarily. There must be a meeting among the company’s shareholders or board or members and managers, as applicable. Before this process can begin, one of two things must usually happen, either:
If the board or the managers initiate the process, the shareholders or the members, as applicable, still may need to agree – depending on what the Bylaws or the company agreement require. Once the resolution is passed, the board or the managers only need a two-thirds majority of shareholders or members to agree, however, this threshold can be lower depending on the terms of the corporate bylaws or the company agreement.
These efforts come with legal requirements. The Texas Business Organizations Code mandates that companies provide voting stockholders with a minimum of 10 days’ notice prior to holding the meeting and the company agreement will state the notice requirements for limited liability companies.
Once the decision to dissolve is made in accordance with the appropriate company documents, a corporation or limited liability company in San Antonio must “wind up” its interests. This is the process of halting business operations, discharging debts, and distributing any remaining assets. The goal is to address all of a company’s liabilities by the conclusion of this stage, allowing it to finalize the process.
The steps involved in this stage generally involves tasks like notifying creditors and resolving any ongoing disputes. Normal business functions will come to a close during this period, and any assets owned by the company must be liquidated.
A company is finished winding up once they have put a dissolution plan in place, discharged their debts—including any taxes—and distributing anything that remains to the stockholders or members, as applicable. Upon conclusion of these activities, the business must submit a certificate of dissolution with the Secretary of State to properly dissolve the business.
Unless the formation document stipulate otherwise, corporate entities are perpetual. In other words, they remain in place forever until they are dissolved. This can lead to significant issues, given that the obligations of operating a company remain in place.
There are tax considerations to be aware of. Each year, companies are required to file state and federal returns before paying any amount due to the government. The failure to file these documents could result in criminal charges.
When a company remains open, it is a potential target for creditors or other interested parties. Dissolution ends the risk of creditor collection efforts. Given the severity of these consequences, seeking guidance from a San Antonio business dissolution attorney could be beneficial.
Terminating a company is a major decision that should not be taken lightly. Mistakes can have serious, lasting consequences that impact you personally.
Put your trust in the hands of a San Antonio business dissolution lawyer at Begum Peláez-Prada PLLC. Call today to discuss your options.
