Voluntary Dissolution of a corporation
When a business is incorporated, the corporation is registered with the Ohio Secretary of State and other agencies. To formally end the existence of a corporation in Ohio, certain formal steps must be followed in order to dissolve the corporation effectively. This article deals with the voluntary process of dissolving a corporation by its shareholders or, in the case of a limited liability corporation, by its members.
First, the corporate bylaws, articles of incorporation, or operating agreements (for a limited liability company) must be reviewed for any special procedures dealing with the dissolution of the corporation. Generally, the dissolution must be approved by at least a majority of shareholders or members, depending on the requirements of the bylaws, articles of incorporation or operating agreement. There has to be corporate resolution authorizing the dissolution. A formal meeting of shareholders or members must be held and all shareholders or members must have the opportunity to vote on the dissolution of the corporation.
Once the dissolution is authorized by the shareholders or members, then a certificate of dissolution must be filed with the Ohio Secretary of State. The information to be disclosed on the certificate of dissolution will vary depending on the corporate type, but generally the name of the corporation and the effective date of dissolution have to be disclosed and the certificate has to be signed by an authorized officer or representative of the corporation.
For a domestic for profit corporation to be dissolved, it must first obtain a Certificate of Tax Clearance from the Ohio Department of Taxation in order to voluntarily dissolve, and it must file a Certificate of Dissolution, Form 561, with the Secretary of State. To obtain the Certificate of Tax Clearance, the corporation must submit Form D5 – Notification of Dissolution or Surrender – to the Department after all applicable final returns are filed. The Department of Tax will then review all business tax accounts associated with the corporation to determine if there are any outstanding tax liabilities or filings. All outstanding tax liabilities or filings need to be filed and/or paid before a Certificate of Tax Clearance will be issued.
A Certificate of Tax Clearance is not required before dissolving a limited liability corporation. However, the Ohio Department of Tax requires the filing of various other forms by a limited liability corporation. Specifically, final sales tax returns must be filed if goods are sold and there is a vendor’s license issued to the business. Form D-5 – Notification of Dissolution or Surrender- must be filed after filing and payment of the final corporation franchise tax return if the limited liability company is classified as a corporation for tax purposes. For federal tax purposes, the taxpayer must check the “final return” box on the IRS From 1065 when the final federal tax return is filed. Filing of other forms might be required depending on the type of business.
The business affairs of the business must be wound up once the vote to dissolve the corporation or limited liability company is entered. Depending on the type of corporation, different rules apply, but in general the corporation or company must wind up the final affairs of the business, such as collecting the assets of the business, selling the assets of business or distributing assets that cannot be sold, and after the satisfaction of the business obligations, distributing any remaining assets of the business to the shareholders or members.
You should consult with an attorney if you want to dissolve your business, as a careful review of the business, type of corporation and applicable rules is necessary. Contact Mina Nami Khorrami for a free initial consultation.
The within statements are general in nature and this information is not intended as a substitute for legal advice regarding your specific case, nor is an attorney-client relationship established between Mina Nami Khorrami, LLC and any person reading this information. Mina Nami Khorrami is an experienced bankruptcy and debt attorney based in Columbus, Ohio.