When a company goes out of business, it’s important to have a detailed plan to handle the process. You especially want to make sure your plan offers guidance on how to comply with any regulations and laws that may govern settlements and asset distributions in your state. These rules may differ somewhat, depending on the exact legal structure of your enterprise. You may also need to report distributions and settlements to state, local and federal tax officials. Consult the following sample checklists for reference on how the process may unfold for different types of businesses.
Keep in mind that these are provided for informational purposes only and may not apply in all situations. Please confirm your legal obligations in your locality before proceeding.
Checklist for Partnerships
- Conclude All Business: Make sure any open contracts and outstanding obligations are closed and settled.
- Appraise All Holdings: Ensure all assets and property are appraised at book value and accurately represented on the balance sheet at the end of the last month before the partnership is dissolved.
- Liquidate all Holdings: Sell any assets you are able to.
- Pay All Creditors: Pay any creditors — including partners who are creditors — from the partnership’s assets.
- When Insufficient Partnership Assets Exist: Partners pay liabilities proportionate to their shares in the partnership.
- When Partners Can’t or Won’t Pay: Whether through insolvency, inability or unwillingness, a partner’s failure to pay will shift liabilities to remaining partners, proportionate to their shares in the partnership.
- Pay All Employees and Independent Contractors: Distribute final wages and salaries. Check to see if your state requires paying vacation or any other earned benefits, as well.
- Set Up a Contingency Fund: Establish contingency funds that will be used to pay any liabilities or taxes that may arise after the partnership is dissolved.
- Distribute Remaining Assets: Partners receive distributions according to the balances remaining in their capital accounts. If remaining assets after settlement are insufficient, whatever remains is typically divided between the partners proportional to the sizes of their capital accounts.
- Transfer Property: Documents are executed as required by each partner to transfer any property apportioned to other partners.
- Pay Wind-Up Costs: Costs are paid that were incurred in winding up the partnership.
- Dissolve the Partnership: File any necessary documents to legally dissolve the partnership. These documents may include final tax returns in addition to the normal dissolution papers.
Checklist for Corporations
- Conclude All Business: Ensure all obligations are settled and contracts are closed.
- Collect All Corporate Assets: Gather together any holdings of the corporation for appraisal.
- Appraise All Corporate Holdings: Appraise all assets and property at book value.
- Liquidate Assets: Sell any property that won’t be distributed to shareholders.
- Pay Debts: Settle accounts with all creditors and pay any outstanding bills.
- Pay Dissolution Expenses: Pay the costs incurred in closing.
- Establish a Contingency Fund: Set aside funding to settle any liabilities or taxes that may arise after the corporation’s dissolution.
- Distribute Assets: Any remaining assets of the corporation are distributed to shareholders according to their stakes in the corporation.
Checklist for Limited Liability Companies
- Conclude Business: Settle any obligations and open contracts.
- Collect Assets: Gather any company belongings to be appraised.
- Appraise Assets: Appraise any company assets and property.
- Sell Property: Any property not intended for distribution to members should be sold.
- Settle Non-Member Debt: Pay all non-member creditors.
- Settle Member Debt: Pay all member creditors.
- Pay Wind-Up Costs: Satisfy the expenses of winding up the company.
- Establish a Contingency Fund: Set up funds to pay any liabilities or taxes that may be incurred after the LLC is dissolved.
- Return Capital: Members are returned their capital contributions.
- Profits and Losses: Any losses or profits are apportioned among members.
These checklists should help guide you as you plan to dissolve a business. Remember to consult local and state laws for specifics unique to your situation.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.