Following recent developments, dissolving a business shouldn’t be viewed as a quick fix to avoid compliance obligations like the Corporate Transparency Act. Businesses must still complete necessary filings and clearances, and expert guidance is essential to ensure smooth dissolution and withdrawal across multiple jurisdictions.
Dissolving a business can be a lengthy, complicated, and daunting process—particularly if you must also withdraw the business from registrations in multiple states. But it doesn’t have to be hard. CSC has outlined the steps business owners need to follow when filing articles of dissolution, obtaining tax clearance, and closing a merged or inoperative entity without risking fines or loss of liability protection.
Why dissolve a business?
Companies need to carry out dissolutions and withdrawals to officially cease their obligations within a jurisdiction. After dissolving and withdrawing an entity, a company no longer needs to pay taxes, file reports, or expose itself to potential liabilities and risks.
Dissolutions can be involuntary—triggered by a regulatory official or by a court order—or voluntary. Voluntary dissolutions may be occasioned by merger of the entity into another business, conversions, or termination of operations.
Withdrawal is part of the dissolution process. In each state where an entity is qualified to operate, the entity must relinquish that right—after satisfying any outstanding reporting and tax requirements. In some states, evidence of dissolution from the entity’s home state will suffice, but others are more demanding and have longer turnaround times, additional forms, or other more complex requirements.
The whole process is governed by a patchwork of state laws and practices. So, it pays to take a careful, methodical approach, aided by experts familiar with various states’ requirements.
The compliance checklist for articles of dissolution
Dissolution requirements vary by the nature of the entity—LLC, LLP, or corporation—and by state. But in general, the process requires:
- Filing a notice of intent to dissolve (in many states).
- Obtaining tax clearance letters. States’ practices vary widely, from no requirement for tax clearance (Delaware, California) to clearances from two departments in a process that can take up to two years (Pennsylvania). It’s best to consult your CSC customer service representative to guide you through the requirements for a particular state.
- Filing the current year’s annual reports, if the state requires.
- Filing articles of dissolution in the home state.
- Filing withdrawal of qualification and registration in other states where the entity does business. This may require evidence of dissolution or merger from the home state and other states.
- Cancelling permits and business licenses.
- Cancelling any certificates for assumed or doing business as (DBA) names, if required by that particular state or county. Again, it’s wise to reach out to your CSC customer service representative for guidance.
What can go wrong with dissolutions and withdrawals?
Dissolutions and withdrawals are most likely to hit snags when an entity is not in good standing with the state. For example, entities cannot dissolve until the annual report is up to date. Companies seeking to dissolve or withdraw may need to file annual reports, reinstatements, and amendments before they can proceed.
The federal angle: CTA and BOI requirements
Don’t count on dissolving an entity to help you avoid the new federal Corporate Transparency Act (CTA)—it’s too late. Under the CTA, entities that were in existence on January 1, 2024, must file beneficial ownership information reports (BOI reports) with the Treasury Department’s Financial Crimes Enforcement Center (FinCEN) by the end of 2024. Dissolving the entity during 2024 won’t eliminate that burden.
CSC’s full-service framework and industry leading team of experts can prepare and file your BOI reports with FinCEN to ensure compliance. CSC supports clients with extensive resources on the CTA, frequently updated with revised FinCEN guidance and the latest legal developments.
How CSC supports businesses with dissolution and compliance needs
The best way to ensure your dissolution goes smoothly is to work with a team that knows the process inside and out. CSC has more than 125 years of experience, operating in 140 jurisdictions worldwide, and brings a wealth of knowledge, experience, and local savvy to handling your registration and qualification issues. Check out our webinar on dissolutions and withdrawals to learn more.
