Dissolution

What is dissolution?

Dissolution is a general term that describes the legal act of dissolving a company or another legal relationship. The steps involved in a dissolution will largely depend on what type of relationship is being dissolved.

Dissolution of a marriage, for example, describes the process of getting a divorce. Before a couple can legally end their partnership, they must follow a specific set of procedures that can include filing a petition and coming to formal agreements on issues related to child custody, spousal support, and division of assets.

Businesses, such as corporations, partnerships, and limited liability companies (LLCs) also follow a specific set of procedures when they’re being dissolved. In most cases, they will be required to file articles of dissolution with the relevant state agency. And, depending on the exact circumstances of the company’s dissolution, the owners will need to take additional steps such as notifying creditors and paying any outstanding taxes, before the business can be officially dissolved. 

FAQs

Do sole proprietorships need to file articles of dissolution?

Unlike corporations, LLCs, and some general partnerships, sole proprietors don’t need to file articles of dissolution when they are dissolving operations. But they still need to follow any rules or regulations for closing a business as dictated by the state.

What happens after dissolution?

Once the dissolution process is complete, the legal relationship ceases to exist. In a marriage, dissolution ends with the formal issuing of a divorce. In business, once dissolution is complete, the business is no longer considered a separate legal entity.

What happens if you don’t file articles of dissolution for your company?

If you don’t file articles of dissolution, the state and federal government may fail to recognize your company’s closure and will continue to expect you to comply with annual reporting and pay renewal fees for licensing and other requirements. Failing to follow the correct dissolution procedure in your state could subject you to fines and penalties.

Can you get a dissolution without going to court?

Dissolution describes the process of dissolving a partnership, not a court process. If you’re ending a marriage or a business, you may need to go to court to outline specific parts of your legal separation, but this will depend largely on your individual circumstances. In many cases, individuals and companies are able to dissolve their partnerships without legal intervention.