There are a number of reasons someone might want to shut the doors to their business. It could be competition from a big box store, an opportunity to do something or move somewhere different. Or it could be a reaction to a major event such as a death, lawsuit or divorce. Often companies are forced to close for failure to pay required fees or other regulatory reasons. However, when owners decide to voluntarily close their business, a formal process called dissolution and winding up, a set of steps must be taken in order to protect them from liabilities and set them up for the best possible outcome.

Dissolution

The legal process of closing a business can be divided into two parts. Dissolution is the first part of closing your business. It involves a vote where all or the majority of owners/partners reach an official agreement on the decision to close. It also requires that notice of the decision be given to the state. Your company should have a document or set of documents from when it was formed known as the articles of organization and the operating agreement. Within those documents there should be a set of rules on how to dissolve the company, spelling out the majority percentage that must be met in a vote to dissolve, and the procedural requirements like how much notice of the vote members must be given.

Winding Up

The second and more involved part of closing a business is called winding up. After dissolution your company may no longer operate accept in its capacity to deal with creditors. You may not solicit or engage in any new business. You may elect one person or multiple members from your company to act as managers in the winding up process. Managers are responsible for:

·       giving notice of dissolution to known creditors;

·       compiling all company assets;

·       disposing of company property;

·       distributing property to members; and

·       discharging liabilities.

Winding up can be challenging if members do not agree on exactly how any remaining assets, or liabilities, should be divided. Naturally, this often occurs in a divorce where spouses were both members of the company. Fortunately, if the founding documents were carefully conceived, winding up will be easier. They may spell out normal profit distribution and percentages for payouts after dissolution. Regardless of member disagreements and any vagueness in company documents, there is still an order for paying outside creditors that must be followed by the winding up managers. Outstanding taxes, for example, must almost always be paid before other creditors.

There is often dispute in the closure of a business. Complicated tax considerations and claims by creditors and other judgment holders can make the process highly stressful. To avoid litigation and an expensive lawsuit, professional legal advice can be very helpful. Attorney Chris Arrington has years of experience in matters of business dissolution and family disputes in Indiana. He would be happy to discuss your issues and help you resolve them so you may move forward in your life.