What Happens When You Dissolve a Company?
When a company is dissolved, it ceases to exist legally and cannot continue trading. Assets are distributed to shareholders after paying off debts. A court-appointed receiver or trustee may oversee the asset distribution process until all claims against the company are resolved.
Steps to Dissolve a Company
The process of dissolving a company involves several key steps:
- Board resolution and shareholder approval.
- Filing articles of dissolution in the state of incorporation.
- Liquidating assets to pay debts and shareholders.
Responsibilities After Dissolution
After the dissolution of a company, officers should only conduct necessary business to fulfill obligations and liquidate assets. Operating under the dissolved company’s name can lead to personal liability for officers.
- Notify creditors to file claims post-dissolution.
- Set aside funds to pay potential post-dissolution claims rather than distributing assets.
Consequences of Mishandling Dissolution
If the dissolution process is mishandled, directors and shareholders may face personal liability. Even after dissolution, the company legally exists until a certificate of dissolution is issued by the state, but operations cannot continue and creditors can still pursue unpaid debts.