Are You Ready to Close Your Doors?

Are You Ready to Close Your Doors?

By Anthony J. Cox, Esq. and Mary G. McCarty

When an Ohio company decides to stop doing business, locking the door and turning off the lights is not enough to terminate the company. In most cases, the business entity will continue to exist — and remain exposed to liability — until it is formally dissolved with the Ohio Secretary of State.

The dissolution process varies depending on the type of entity. The most common entities for for-profit businesses are the limited liability company, or “LLC,” and the corporation.

Dissolution of an LLC

Dissolution of an LLC is a relatively simple process: once the members of the LLC have agreed to dissolve, the members must file a Certificate of Dissolution with the Ohio Secretary of State (together with a filing fee) and dissolve according to their corporate documents, satisfying financial obligations first and then (assuming funds remain) distributing remaining cash to members.

Dissolution of a Corporation

Dissolving a corporation, however, is more involved and can take several months to complete. First, the corporation’s shareholders and directors must adopt resolutions authorizing the dissolution of the corporation and the liquidation of its assets. The corporation must also notify the Ohio Department of Job & Family Services, Ohio Bureau of Workers’ Compensation, and the Ohio Department of Taxation of its intent to dissolve and close its accounts, and it must obtain from the Department of Taxation a Tax Clearance Certificate showing no outstanding liabilities (a process which can take 6-8 weeks). Once the corporation obtains the Tax Clearance Certificate, it must be filed along with a Certificate of Dissolution with the Ohio Secretary of State. Finally, the corporation must give notice to each known creditor and/or person who has a claim against the corporation following the requirements of the Ohio Revised Code.

After the entity is dissolved, the corporation must take the necessary actions to wind-down the business (collect assets, resolve its liabilities, dispose of property, etc.). Assistance from competent legal counsel and an accountant is necessary to ensure that your best interests are held and that the process runs smoothly.