Dissolution and Liquidation
Various reasons can lead to the dissolution and liquidation of a business, such as bankruptcy, retirement, change in the relation of the owners or change in career direction. However, dissolution is not the last act in the life of any partnership, limited partnership, limited liability company or corporation.
The business entities survive to wind up the affairs, pay off creditors and distribute what is left to the owners. Therefore, when a company is no longer conducting business, it is important to follow the legal steps to wind itself up as a legal entity.
A business can dissolve for reasons and according to procedures provided for under the Florida Statues, Florida common law and the company’s governing documents. Unless exceptions apply, a company’s dissolution commences the winding up of the company’s affairs and leads to the company’s ultimate termination.
The business entity must complete transactions that have begun and sell its assets. Once the assets are sold, the proceeds are distributed to the owners according to a plan governed by Florida law, federal law and the company’s organizational documents.
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Liquidation of a company is a last resort strategy and it occurs when there are no prospective investors to sell the company to, or there are no other merger or successors options on the horizon. However, a company should have a plan that details the process of redistributing assets to creditors and owners. Liquidation is a complex process and generally requires a company to engage highly qualified processionals. We recommend business owners to speak to an experienced attorney and accountant before starting to liquidate assets and sell equipment, discontinue utilities or terminate any leases.
In Florida, a corporation, limited liability company or limited partnership are entities created under the authority of the State of Florida. Accordingly, when any of these entities dissolve or liquidate, their existence may only be terminated by the State of Florida. However, a company remains liable for all taxes, assessments, fines, penalties and interests until it receives an official certificate of dissolution from the Secretary of the State of Florida. In Florida, legal entities must be dissolved through formal action and by sending the required filings to responsible agency. The procedure for dissolving a company is provided in Title 36 of the Florida Statute.
It is important to properly dissolve a company even if it is no longer doing business for two main reasons – taxes and fees and personal liability. Regarding taxes and fees, the company remains liable to pay taxes and other fees as long as the legal entity is in existence. If the company is not legally dissolved pursuant to Florida law, it incurs unnecessary expenses and must file federal, state and municipal tax returns. With respect to personal liability, if the company is not properly dissolved, the directors, officers, shareholders, members or partners remain personally liable for certain aspects of the company business.
We can successfully assist and advise you through the process of dissolution and liquidation. Contact us, your corporate lawyer in Florida, to help you develop a plan of dissolution or liquidation and assist you with all the steps.
Malescu Law P.A. – Business & Corporate Lawyers