When it comes to corporations, LLCs, and other entities, people tend to focus on their birth rather than their death, with most available literature being on the pros and cons of different types of entities and how to go about creating one. But for reasons similar to why the birth of LLCs and corporations is a regular, ongoing need for many of our clients, so too is the death of these entities.
Of course, a classic example would be when a business ceases operations and is liquidated. There are plenty of more routine reasons why this might happen though. For example, an entity might be created for the specific purpose of holding one piece of real estate that is being developed or renovated. Once the work is done and the developer sells the real estate for a profit, what happens to the entity? Often, the entity, having served its purpose, is put through the dissolution process.
The scenarios listed above are examples of voluntary dissolutions where the owners decide they want to terminate the entity’s existence. Other types of dissolutions exist, such as administrative dissolutions and judicial dissolutions, but this post will focus on how to dissolve an entity when all the entity’s owners agree that dissolution is in their best interest. The process differs for Missouri corporations and LLCs, varies wildly across other states, and can depend a great deal on the provisions of the entity’s organizational documents. The process outlined below describes minimum statutory requirements in Missouri. This post is a mere summary and not intended to be all inclusive. There are myriad considerations to take into account when deciding whether to dissolve an entity, and you should consult an attorney about the legal and tax consequences of doing so.
Steps for Dissolving a Missouri Entity:
For both corporations and LLCs, something you’ll want to know before starting the process is who the shareholders or members are, what their percentage ownerships are, and who the known creditors are and where they can be found. All of the following steps are required by statute; the applicable statutes may be found in Chapter 347 of the Missouri Revised Statutes for LLCs and Chapter 351 for corporations.
Step 1: “Last Dance (Last Chance)”
Before dissolving a corporation, it’s important to give it one “last dance” by having a final meeting to discuss dissolution and making sure all shareholders are afforded their last chance to object to closing down the company. To do this correctly, you’ll need to prepare a notice of special meeting regarding dissolution and then document the meeting with minutes. The approval of the holders of at least 2/3 of the outstanding shares will be required to proceed with the dissolution, and possibly more depending on the governing documents of the company. Alternatively, you can prepare a written consent agreeing to dissolution and have all shareholders sign that consent. Similarly, for LLCs, a unanimous written consent to dissolution will suffice.
Besides being required, doing this will confirm that the dissolution was authorized should there be any questions later. It’s good to also prepare a plan of liquidation detailing how the dissolution will occur and who will have authority to carry out the dissolution.
Step 2: Last Rites
Once the dissolution has been authorized, you can go ahead and file with the Secretary of State informing them (and the world) that the company is being dissolved. For corporations, this filing is called Articles of Dissolution by Voluntary Action, and for LLCs it’s called a Notice of Winding Up. For both types of entities this step is a simple process because the Secretary of State provides fill-in-the-blank forms. The fee for filing these is $25. Do not be lulled into thinking this ends the process, however; unlike like some states, Missouri requires two separate filings to complete a dissolution (more on the second step later). From here on out, the company’s operations will be limited to winding up its affairs.
Step 3: Provide the Notification of Death
Once the Articles of Dissolution or Notice of Winding up has been filed, it’s time to inform any known creditors of the company that the company is being dissolved. The notice will need to state the information that must be included in the claim, the mailing address for claims, and the deadline for bringing claims and a notice that claims brought after the deadline will be barred. For corporations, creditors must be given at least 180 days to bring a claim; for LLCs this number is 90 days.
Step 4: Place the Obituary
Unfortunately, notifying known creditors isn’t enough. You’ll also need to “notify” unknown creditors by publishing notice in three different places: once in the Secretary of State’s Missouri Register, once in a statewide publication targeted at lawyers in Missouri, and once in a newspaper of general circulation in the county where the company’s general office is located. After these publications are made, creditors of corporations will have two years to bring a claim, and creditors LLCs will have three years.
Step 5: Give It a Proper Burial
After the claims period has passed (or sooner if no claims are possible), you should file the appropriate document with the Secretary of State (this will incur a $25 fee). For corporations this is called a Request for Termination, and for LLCs it’s called Articles of Termination. Lastly, you’ll want to obtain a Certificate of Termination from the Secretary of State once the termination request is granted and place that in the company’s records.
Once those five steps are complete, you’ll have successfully dissolved your company. As a result, you’ll no longer need to worry about lingering liabilities for the dissolved entity and can move on with life (and your next business venture).