- When a corporation is considering dissolution, the board of directors must meet, propose, and vote on it. The board of directors is not just voting on whether to end the company or not, but also on the specific dissolution plan and the necessary actions going forward. The corporate dissolution proposal must receive a majority vote by the shareholders (see Reference 1).
- The legal steps for dissolving a corporation are laid out by the Model Business Corporation Act as well as the Revised Model Act, which is a slightly different version adopted by a number of states. Each act requires the same legal steps but in different order; the first step in the Model Business Corporation Act is to file a Statement of Intent to Dissolve with the secretary of state before filing the Articles of Dissolution, while the Revised Model Act allows corporations to file the Articles of Dissolution first. The next legal step is to complete an IRS Form 966, which must be filed within 30 days of the shareholder majority vote to dissolve the corporation (see Reference 3).
After filing these necessary legal forms, the organization must sell all of its assets that cannot be distributed to shareholders. While liquidating all assets, the corporation is required to notify all creditors about its pending dissolution so the corporation can resolve any outstanding debts (see Reference 3). When notifying creditors of the dissolution, the following information should be included: the required information for a claim to be considered, the address to send the claim, and a deadline for submitting the claim (see Reference 1). - If a corporation's dissolution isn't finalized, the organization is still expected to file all federal and state tax reports, as well as annual reports. Both of these unmet requirements will result in penalties and fees until the corporation is officially dissolved. The corporation and their shareholders will still be considered liable for all its products it sold during the life of its business; once the dissolution is complete, the corporation and its members are completely free from any liability (see Reference 3).