BUSINESS LAW 101 / CLOSING A BUSINESS

By Albert L. Kelley, Esq.

At some point, most businesses must be closed. Unless the business is sold or transferred or inherited, it will come to an end. The question is how you end it. The first step is to make sure the business is ready to be closed. This is called the winding down period. If there is a lease, is a lease at the end of its term or the middle? Even if the business is closed, there may still be an obligation to continue paying rent. Have all vendors been paid? In some situations, when a business is closed, the owners may have personal liability for any outstanding obligations of the business. Have all taxes been paid, including sales tax, property tax and employment tax? As a general rule, anyone with decision-making authority or check writing authority has liability for tax obligations for the business.

Once the business is wound down, the next step is closing the operating structure. For sole proprietorships and partnerships, all that is really required is notifying the appropriate government agencies such as the Department of Revenue that you are no longer in business. This stops any additional tax liabilities for not filing the appropriate tax returns. For corporations and limited liability companies, the process is a little more detailed. Merely stopping doing business does not dissolve a corporation/LLC; liability will continue until there is an actual dissolution.

The first step to close a corporation is to hold a meeting of the shareholders where a vote must be taken to close the business. The notice of the meeting must specify that is to consider dissolution of the company. A majority of shareholders must agree to the dissolution. In lieu of holding a meeting, a majority of shareholders may simply consent to the dissolution in writing. Once the shareholders passed a resolution to dissolve the company, the Board of Directors drafts Articles of Dissolution which are filed with the Department of State. The articles of dissolution must state the name of the company, the date of dissolution, and a statement that the number of shareholders voting for dissolution was sufficient for approval.

If there are any known claims against the dissolved corporation, the corporation must send a notice to those claimants advising them of the dissolution, providing a description of the claim, giving a deadline to file the claim with the corporation, and provide a mailing address for the claimant may be sent. The corporation then must make either accept or reject the filed claims and make arrangements to resolve all accepted claims. For those claims which are contingent or not matured, the corporation must provide security for future payment. If rejected, the corporation must file a written notice rejection to the claimant, allowing the claimant to present the claim to court for satisfaction. If the corporation fails to follow the statutory procedure for resolving claims, the shareholders and directors may incur personal liability for all claims not satisfied.

Once all the outstanding claims have been satisfied, the remaining assets of the corporation shall be distributed to the shareholders in proportion to their percentage of ownership.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” “Basics of Florida’s Small Claims Court”, “Basics of Florida’s Landlord-Tenant Law” and “Basics of Starting A Business” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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