Liquidating a close corporation
If the corporation is dissolved involuntary by the court or administratively by the state, the shareholders can incur additional expenses and liabilities.Avoiding these negative financial consequences requires proper dissolution of the corporation.You should inform all business associates, creditors and consumers about the dissolution, and ensure that all business debts and wages are paid.Finally, you must notify the state and file final tax returns.This will cause the shareholders to incur a tax liability they were not planning for.Shareholders who properly wind up the business operations of their corporation may still incur future liabilities if they fail to take all the steps necessary to dissolve the corporation.In most cases, the misstep occurs by failing to file articles of dissolution with the state -- which means the corporation still exists and must continue making its annual filings and payment of fees to the state.In states such as California that do not administratively dissolve corporations for failing to make these filings and payments, the corporation is suspended but still in existence.
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A big concern for corporation shareholders is whether they will be liable for the company's debts and obligations after it closes.
In some situations, a shareholder might be held personally liable for the corporation's debts, but the good news is that steps can be taken to reduce or eliminate the liability beforehand.