Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Do You Need an Attorney to Dissolve a Business?

Author: Christopher D. Warren

Date: July 5, 2024

Key Contacts

Back
Do You Need an Attorney to Dissolve a Business?

Closing your business can be a difficult process no matter what the circumstances. After all, you have likely poured significant money, time, and effort into your business. While it may seem more costly and time-consuming, working with an attorney to dissolve your business formally is always a good idea. If a business dissolution is not handled properly, you could face significant liability after you close your doors.

How to Close a Business

The term “business dissolution” refers to the legal process of closing a business. There are a myriad of reasons why business owners may elect to close their doors, including financial challenges, partnership issues, shareholder disputes, or the desire for different opportunities.

In most cases, you are not legally required to retain a business dissolution attorney. However, given the complexity of the process, it almost always makes sense. Below are just a few of the legal issues that must be addressed:

  • Filing Dissolution Documentation: When closing a business, you must file several important documents. An attorney can help ensure that all of the necessary documents are correctly filed with the relevant entities. For example, under New York law, limited liability companies must prepare and file the articles of dissolution with the New York Secretary of State within 90 days of taking action to dissolve the LLC.
  • Settle Outstanding Business Debts: It is imperative that all of your debts are paid prior to officially dissolving your business. An attorney can help you identify and prioritize which debts must be paid and work to reach the most favorable settlements.
  • Resolve Tax Liabilities: When dissolving a business, you must also file income, employment, and sales tax returns with the appropriate tax authorities. For instance, New Jersey corporations must submit an Estimated Summary Tax Return, pay any amounts due, and obtain aTax Clearance Certificate In addition, the dissolution is considered effective as of the date the Division of Revenue receives the properly completed and executed articles of dissolution, payment of all fees, and notice of Tax Clearance from the Division of Taxation. Working with an accountant and a tax attorney is the best way to verify that you have no outstanding tax liabilities after your business is closed.
  • Cancelling Leases and Other Contracts: Every business has numerous contractual obligations and each agreement should specify the process for notifying the other party that you plan to dissolve the business and terminate your contractual obligations. An attorney can guide you through the process of terminating your contracts and reduce the risk of a breach of contract claim. If you lease property, it is particularly important to seek legal guidance, as an attorney can help you negotiate the most favorable terms for ending your lease.
  • Selling and Distributing Assets: Upon closing, businesses often have significant tangible and intangible assets, including commercial real estate, equipment, and intellectual property, that must be distributed or sold. Additionally, any outstanding funds must be dispersed to the company’s remaining shareholders, members, or partners. An attorney can negotiate the sale of these assets, as well as verify that assets are distributed fairly and in compliance with all applicable laws.

Common Business Dissolution Disputes

It is not uncommon for disputes to arise during the business dissolution process, particularly if disagreements between partners, investors, or management prompted the closure in the first place. The most frequent sources of friction include how to divide up assets and liabilities. When dealing with disputes among co-owners, mediation can be an effective conflict management tool. In working with a mediator, owners can often reach a resolution that allows the dissolution process to move forward, saving both time and money.

Breach of contract claims can also result from a business closure. During the dissolution process, a business not only retains the right to expect the performance of their existing contracts, but also remains responsible for performing or paying on those contracts. In many cases, an attorney can help terminate a contract early without legal repercussions; although, it becomes more challenging when dealing with poorly drafted contracts. Other issues, including non-compliance with a contract’s termination provisions and failure to pay early termination penalties, can also lead to potential breach of contract liability.   

Disputes over the payment or outstanding taxes can also arise and may subject corporate officers to personal liability. For instance, if dissolution procedures are not completed, and full payment of the outstanding liability is not received, the New Jersey Treasury’s Division of Taxation may pursue a collection action against the corporation and its corporate officers. Under New Jersey law, any officer or director of any corporation who distributes any assets in dissolution or liquidation to the stockholders without having first paid all corporation franchise taxes, fees, penalties and interest can be personally liable for unpaid taxes, fees, penalties and interest. 

Work With an Experienced Business Dissolution Attorney

While the business dissolution process can seem like a hassle, simply walking away will almost always lead to problems down the road. It is imperative to take all the necessary steps to formally close your business and resolve all outstanding liabilities. At Scarinci Hollenbeck LLC, we work with business owners to make the process as seamless as possible, so you can move on to the next phase of your life. Our dedicated business dissolution lawyers have decades of experience serving as trusted advisors to corporations, LLCs, and partnerships of all sizes. From negotiating a dissolution agreement to filing the final paperwork, we can guide you through the process, while also safeguarding your best interests.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Corporate Transactions: Best Practices for Successful Deals post image

Corporate Transactions: Best Practices for Successful Deals

Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]

Author: Dan Brecher

Link to post with title - "Corporate Transactions: Best Practices for Successful Deals"
How to Conduct a Fair and Legal Employee Termination in 2025 post image

How to Conduct a Fair and Legal Employee Termination in 2025

Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]

Author: Angela A. Turiano

Link to post with title - "How to Conduct a Fair and Legal Employee Termination in 2025"
Admin Dissolution for Annual Report: What You Need to Know post image

Admin Dissolution for Annual Report: What You Need to Know

While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]

Author: Dan Brecher

Link to post with title - "Admin Dissolution for Annual Report: What You Need to Know"
What Is Antitrust Litigation Law? post image

What Is Antitrust Litigation Law?

Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]

Author: Robert E. Levy

Link to post with title - "What Is Antitrust Litigation Law?"
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!