What happens when a company dissolves? Legally, a dissolved company ceases to exist and cannot continue operating. After paying debts, remaining assets distribute to shareholders. To dissolve a company, the board passes a resolution. Shareholders then approve. File articles of dissolution in the incorporation state.
Companies not meeting state rules may dissolve without shareholders knowing. This can result in personal liability if operations continue. You should formally dissolve no longer conducting business to avoid further liability. The state expects compliance with requirements until dissolved.
Liquidation of Assets
After dissolution, liquidate assets by selling or auctioning physical and intangible assets to pay debts and shareholders. Officers should only conduct business to complete obligations and liquidate assets. If an officer continues under the dissolved name, personal liability assumed.
When dissolving an LLC, follow state rules on steps and waiting periods for notifying debtors to file claims. Properly notify each creditor to file outstanding claims if terminating.
If a creditor may bring a post-dissolution claim, set aside funds to pay rather than distribute assets. S corporation assets distribute to shareholders upon liquidation.
Final Steps After Dissolution
Once creditors receive notice to file claims, dissolve. Then cancel registrations, sell assets, and use proceeds to pay owners.
A dissolved company legally exists until the state issues a certificate of dissolution. However, the company cannot operate and creditors can still pursue unpaid debts. Directors and shareholders may have personal liability if mishandled.