There are two ways to disincorporate a business. Sole proprietors notify but have no dissolution process. Limited companies take months to liquidate assets, pay creditors before closing. The main routes are Members’ Voluntary Liquidation, to access assets tax efficiently or Creditors’ Voluntary Liquidation for insolvent companies owing money. Court-ordered liquidation can force closure if unable to pay debts. Before applying to dissolve, consider if company may serve future purpose despite high costs.
In California, disincorporation of a city can be proposed either by petitioning the area LAFCO or by filing a resolution adopted by that city itself, the county, or any affected special district. It removes the status of a corporation, so an area would be reabsorbed into a township. Dissolving a town terminates its political jurisdiction to operate as an incorporated municipality.
The most significant issue is capital gains tax from disposing assets at market value, especially for property or goodwill. “Roll-over” relief on assets transferred when incorporating may apply.
First, hold a directors’ meeting to propose ending the company. Then file Articles of Dissolution. The state confirms dissolution by sending a Certificate. The final act distributes assets to shareholders who have ownership interest.
If inactive, states may dissolve companies and make owners liable. A company not meeting requirements gets administratively dissolved, ceasing operations. Do responsibilities before applying or face consequences.
To remove its name, a struck off company cannot operate. Dissolution information is public for 20 years. The process takes two to three months after filing.
Sole proprietors dissolve fastest in one to six months. Limited companies take six to 24 months to liquidate assets and pay creditors before closing.
The main routes are Members’ Voluntary Liquidation, useful to access assets tax efficiently, although three months. And Creditors’ Voluntary Liquidation for insolvent companies owing creditors.
When unable to pay debt, court-ordered compulsory liquidation can force closure.