Dissolving a business is never an easy decision. It requires careful consideration. Why?

Because business dissolution is not something you often envision, at least not when you start a business. The emotional difficulties associated with business dissolution can be overwhelming due to the legal, financial, and regulatory hoops you must jump through to complete the process.

The good thing is that with the right guidance, understanding, and support, you can smoothly navigate the business dissolution process, avoiding any hiccups or further hurdles. However, to do this, you need an expert.

When considering business dissolution, consulting an experienced business dissolution attorney can help you understand the process and ensure you complete the procedures according to the various requirements.

Don’t want to wait? Seek support from Cape Girardeau, MO, business dissolution lawyers today.

What Is a Business Dissolution?

Think of a business dissolution as a formal process that you must follow to close your business in accordance with established rules and procedures. When you dissolve a business, it becomes non-existent legally, and you cannot carry out any activity or transaction under its name. All business-related operations cease.

It is important to note that the choice to dissolve a business may be voluntary or involuntary. Let’s take a look at each scenario.

  • Voluntary Business Dissolution: The business owner decides, without any external considerations, to shut down or close the business.
  • Involuntary Business Dissolution: External factors may compel the business owner to close the business — for example, failure to pay taxes, violation of state law, or inability to adhere to corporate practices/procedures.

As you can see, there are many reasons why someone may decide to dissolve their business. In the next section, we break these down further.

Reasons for Dissolving a Business

There are numerous reasons a business owner may have to dissolve a business. Sometimes, it is personal; other times, it results from circumstances beyond their control. However, there tend to be general patterns regarding business dissolution. Let’s look at some of the most common reasons for business dissolution.

Change in Ownership

Change is supposedly the only constant in life. This is also true for businesses. There are times when a business has to adapt to changes in ownership, the economy, consumer behavior, government rules and regulations, and more. When these sudden changes occur, the owner may conclude that dissolving the business is the best course of action.

Financial Struggles

Money makes the world go ‘round. For a business to run its daily operations without hurdles, it needs sufficient finances. If you cannot meet the business’s financial obligations, this can become a problem in effectively running the business. It may call for business dissolution in extreme cases, such as business bankruptcy.

There could be several factors for one’s financial difficulties in running a business:

  • Declining sales, resulting in low or no profit at all
  • A lack of proper financial planning
  • An increase in expenses without any commensurate profit
  • Unexpected market changes.

Or there could be difficulties around cash flow. One study found that cash flow issues account for approximately 82% of business failures.

Making Room for New Opportunities

Running a business is hard. And if you’re only just getting by, you may begin to look for new opportunities, which could result in the dissolution of your business. Furthermore, our interests change over time, which may mean your business shifts from your main interest and passion to a pursuit that no longer aligns with your goals. Dissolving a business can, in this instance, allow free time and resources to explore new opportunities.

Other reasons to dissolve your business to make room for new opportunities could be:

  • New business ideas
  • Personal reasons, such as health issues, family obligations, and relocation
  • Retirement.

Preparing to Dissolve a Business

Preparing to dissolve a business without support isn’t an easy task. However, when you understand the necessary steps, the relief is immense. You must remember these fundamental steps before you can dissolve a business:

  • Fulfilling Financial Obligations: A business owner must settle all outstanding financial obligations to avoid liability. These may include settling any outstanding debts, resolving legal disputes, offsetting staff salaries, and paying taxes.
  • Notifying Stakeholders: A business owner should inform all relevant parties, particularly stakeholders, of the dissolution. This is particularly important for incorporated businesses.
  • Liquidate Assets: A business owner must liquidate any assets, including property, equipment, and inventory, in preparation for business dissolution. They can use these proceeds to fulfill financial obligations.

The Legal Process of Dissolution

The legal process of business dissolution varies depending on the type of business entity (e.g., LLC, corporation) and the jurisdiction in which the business is located. However, there are some broad steps that most businesses have to follow during the legal process of dissolution.

Board of Directors Resolution & Shareholder Approval

When the business in question is a corporation, the board of directors has to pass a resolution for you to proceed with the business dissolution. In a board of directors’ resolution, you have to identify the reasons behind dissolving your business and your plan for the dissolution process.

To dissolve a corporation, you must also seek approval from the shareholders. The shareholders vote to approve or deny the board of directors’ resolution.

Filing the Correct Documents

You will need to file the appropriate documents with the state where you formed the business. This may include filing:

  • Articles of dissolution
  • A public statement of termination or an application for dissolution which officially terminates the business’s legal existence
  • Any paperwork relating to the payment of outstanding debts.

In most cases, you must file this paperwork with your state’s Secretary of State Office. Additionally, you will also need to pay a filing fee, which could vary depending on the state.

To understand more, talk to a business dissolution lawyer at Birk Law Firm.

Finalizing State and Federal Compliance Requirements

The procedure for the dissolution of a business may be subject to certain state and federal laws or regulations. You must be aware of these and understand the requirements to abide by these rules and regulations.

Among other things, this could include filing tax returns, cancelling any business licenses or permits, and closing any business accounts. The Internal Revenue Service (IRS) provides a checklist of all the necessary steps. Our business attorneys are well-versed in these requirements and other compliance criteria.

Financial Considerations When Dissolving a Business

Dissolving a business can have significant financial implications. Here are two key financial considerations to remember: tax implications and employee rights and benefits.

Tax Implications

There may be tax implications associated with dissolving a business. Depending on the type of business entity and the reason for dissolution, taxes may be owed on any remaining assets or profits.

Employee Rights and Benefits

In the dissolution of a business, considerations of your employees’ rights and benefits are of utmost importance. You have to comply with established rules in this regard. For instance, you must issue a notice of abrupt termination within the expected timeline. You may be required to pay any accrued vacation or sick time.

You may also have to make severance pay, where appropriate. The main objective is to ensure that your employees’ rights are not knowingly or unknowingly violated and that they are treated fairly in the entire process of dissolution.

Get Support from a Cape Girardeau, MO, Business Dissolution Lawyer at Birk Law Firm

If you’re facing a business dissolution, it can be a difficult and stressful time for you and your company. Seeking support from an experienced and knowledgeable business dissolution lawyer can help ease the burden and provide the guidance you need to navigate the process successfully.

At Birk Law Firm, our team of lawyers in Cape Girardeau, MO, has a wealth of experience handling complex business dissolution cases. We can help you understand your legal options, protect your assets, and minimize the impact on your business and personal expenses.

Trust us to provide you with the support and expertise you need to confidently move forward. Call us today at 573-332-8585.


Can Someone Still Sue My Dissolved Business?

Yes. Someone can still sue your business, even after dissolution. However, the legal process may be more complicated, and the available remedies may be limited. Our attorneys understand this and can help out.

How Long Does It Take to Dissolve a Business?

The time it takes to dissolve a business can vary depending on the type of business entity, the reason for dissolution, and the state in which it was formed. It can take anywhere from a few weeks to several months.

What Happens to the Business’s Debts When It Is Dissolved?

When a business is dissolved, you must pay off any outstanding debts before distributing any remaining assets to the appropriate parties. The company may need to file for bankruptcy if there are insufficient assets to pay off the debts.


Why Choose Birk Law?

Birk Law Firm is a small firm by choice that is big on client services. Attorney Kelvin Birk and his team are responsive to their clients’ needs. When we sign on as your law firm, you can count on us for strong legal counsel, from negotiations to settlement to trial.

Cape Girardeau Law Firm Kelvin BirkOur clients benefit from the intertwining of Kelvin Birk’s legal and CPA background and experience. We provide well-rounded advice to solve both legal and financial issues and to come up with creative solutions. We use modern technology to deliver legal services in a more efficient and client-focused manner than was previously possible.

We provide personalized and compassionate service. We believe that each client’s matter is the most important matter in the world to them, and we strive to treat it that way.


Contact Kelvin Birk