According to an analysis by Business Insider, over 9,300 retail stores closed in the United States in 2019. A business can close by simply shutting down its operations. However, closing a business legally and in good faith requires dissolving the business thus, ending any responsibility to handle debts, taxes, and other commitments. If you are considering dissolving a business entity, it is important to consult with a knowledgeable Tennessee attorney immediately for proper guidance.
With more than 40 years of combined legal experience, our attorneys at McCarter | East PLLC can help you understand the business dissolution process and determine what best suits your needs. Whether you are dissolving an LLC, corporation, or sole proprietorship, our team can offer you the comprehensive guidance and advocacy you need to navigate key decisions. We are proud to represent business owners throughout Murfreesboro and Berry Hill, Tennessee.
Reasons for Dissolving a Business
Business dissolution can be described as the act of dissolving or closing a business entity formally or legally. Closing a company legally can help you avoid fines, fees, future taxes, or continued liability. Some of the more common reasons businesses close include:
Low cash flow
Negligent accounting practices
Excessive debts through loans
Mismanagement of business operations
Disagreements between business partners
Failure of succession-planning
Failure to comply with mandates
The process of closing a business will depend on the business structure.
Dissolving an LLC
The process for dissolving a limited liability company (LLC) in Tennessee involves:
Approval from Members: Members of the LLC must approve the dissolution through a vote.
Notice of dissolution: A notice of dissolution must be filed with the Division of Business Services (DBS) of the Secretary of State. The dissolution notice should contain the following:
Cancel Permits: All regional, state, city, and county business licenses and permits should be canceled.
Dissolving a Corporation
The process for dissolving a corporation in Tennessee involves:
Scheduling a board of directors' meeting to create a resolution to dissolve the corporation
Holding a shareholders' meeting to approve the motion to dissolve the corporation
Submitting a written Consent to Dissolution and other required annual reports to the Tennessee Secretary of State
Paying off any outstanding business debts, administrative fees, and taxes
Distributing any remaining property, assets, and money
Closing all corporate bank accounts
Canceling all regional, state, city, and county business licenses and permits
Filing Form 966 (Corporate Dissolution or Liquidation form) within 30 days of approval to dissolve the corporation
Canceling the tax account that is connected to the corporation's Employer Identification Number (EIN)
Failure to properly dissolve the corporation can result in continued liability and expense.
Dissolving a Sole Proprietorship
The process for dissolving a sole proprietorship in Tennessee involves
Notifying customers and employees that you will be closing
Ending all business operations
Giving employees their final paychecks
Paying all outstanding business debts
Canceling any professional or occupational licenses
Canceling business permits with local and state authorities
Closing any tax accounts connected to the business
Ensuring that each step is accurately performed is critical in releasing the business owner(s) of the ongoing accountability.
Work With Experienced Legal Counsel
Regardless of your entity type, dissolving a business involves a lot of complexities. Steps such as filing the Certificate of Dissolution, filing federal, state, and local taxes, and notifying creditors can make the process even more complicated and overwhelming. While you may have the best intentions, it’s possible that you may overlook a critical step and end up being held responsible for a debt, issue, or situation that you incorrectly believe to have been resolved.
At McCarter | East PLLC, we are dedicated to providing outstanding legal services and comprehensive guidance in matters of business formation and dissolution. Our attorneys can help you file the necessary forms and taxes, address existing liabilities, and help protect your own assets. As experienced Tennessee business dissolution attorneys, we can offer you proper direction and review your options for a streamlined process.