How you dissolve a business in Texas is just as significant as how you start it. Months of preparation are often required for a successful business dissolution. However, many business owners overlook critical legal considerations.
Feldman & Feldman brings extensive experience when you need the guidance of a Houston business lawyer. Below, we explore the legal considerations in dissolving a business that may impact your company’s future.
Review the Structuring of Your Business
Your business structure will determine how to proceed with the dissolution process. Sole proprietorships allow a business owner to dissolve a business without consulting other partners. In an LLC, members or managers must collectively agree to dissolve a business. Shareholders in a corporation, a board of trustees, or other groups who govern the business play a crucial role in this decision.
Get Approval for Dissolving a Business
The responsible parties must agree to dissolve a business. Reviewing the operating agreement can clarify requirements and help prevent legal missteps. When the agreement does not specify voting procedures, state laws may apply.
A formal vote by governing members or managers is necessary to approve the dissolution. Carefully document the meeting minutes and any related discussions.
The documentation proves compliance with state law and the business’s operating agreement.
The details of the meeting and the final decision will become part of the official record of the business dissolution. Meeting records may also serve as legal protection if questions arise about handling final business decisions. The business agreement may provide additional instructions to complete these remaining tasks of dissolving a business.
Cease Business Operations
Determining a date to stop conducting business marks the date a company makes no further transactions. Meeting all contract requirements when winding up a business is an essential legal consideration. Additionally, a business should avoid entering into any additional contracts. Any transactions moving forward should facilitate the business dissolution.
Notify Creditors and Claimants
Creditors must be informed of the business’s decision to dissolve. Failing to notify creditors or claimants in business litigation matters can lead to legal ramifications. Businesses may choose to dissolve when financial challenges become too great, but deciding to dissolve a business does not remove the financial obligations, debts, or legal actions of a business.
Texas law has no definitive time you must provide to creditors before closing a business. However, 90 days is generally considered a reasonable timeframe. Written notice with clear claim deadlines allows creditors a specified timeframe to seek repayment.
Begin Selling and Distributing Assets
An operating agreement, company agreement, or bylaws may specify the distribution of assets after paying creditors and claimants. Liquidating assets is a powerful tool for covering debts and financial obligations as long as it occurs within the business agreement’s guidelines.
Next, invested parties can distribute the remaining assets among themselves according to the agreement. Members or shareholders owning varying percentages of the business will divide the assets accordingly unless an equal distribution is specified.
A Houston business lawyer can be crucial in mediating during more stressful procedures.
An unbiased approach to your legal considerations can help accomplish these legal tasks. With experienced legal guidance, minimizing disputes to aid in the winding-up process is possible. Our approach is to help you meet any legal obligations while minimizing conflicts that prevent you from reaching your goals successfully.
Pay State Business Taxes
A business must prove payment of all outstanding taxes before dissolving a business in Texas. A review of the requirements of your business structure by a business lawyer in Houston will ensure you file the necessary paperwork. A Certificate of Account Status demonstrates the business is in good legal standing.
The franchise tax overview lists the entities subject to franchise tax in Texas. Failing to pay the tax may forfeit your right to conduct future business. You may also lose the right to legal action or to defend against litigation against you.
Review Final Outstanding Business Matters
The final tasks and legal considerations your business must make depend on your business. Addressing outstanding legal matters prevents legal action against you or others in positions of accountability. A review of outstanding business matters can identify your final tasks.
How long it takes to dissolve a business in Texas depends on its complexity. Missed steps and other setbacks can add to the time and frustration. Plan on investing several months into the process once a decision to dissolve occurs.
File a Certificate of Termination
The final legal consideration in dissolving a business in Texas is filing a Certificate of Termination. Your business structure also dictates whether you must complete this step. You may also need to attach a certificate of account status based on structuring.
Dissolving a deceased owner’s business may occur under the terms of the deceased’s will, a shareholder’s agreement, or by law. The state is unable to offer legal guidance. Probate Court must appoint you as the legal representative of the deceased, you will need to account for additional legal considerations.
The Certificate of Termination formally declares a business’s conclusion. Specific information about the business and a confirmation of debt settlements are necessary. Providing an account of the division of assets also affirms that a business is responsible for meeting all legal obligations and that no outstanding litigation against it remains.
Pay Filing Fees and Retain Documentation
A filing fee will accompany a certificate. You will receive a formal confirmation notice from the Secretary of State to add to business documentation. A business can effectively address or prevent further legal considerations with planning, diligence, and legal guidance.
Let Our Houston Business Lawyers Address Your Legal Considerations in Dissolving a Business
Strategic planning and legal experience are necessary to protect your interests in dissolving a business in Texas. Failing to account for legal considerations in the dissolution process can lead to additional financial costs and unnecessary risks.
How you wind down a business is as pivotal to your continued success as the steps you take to start a business. Feldman & Feldman provides trusted counsel and insight specific to your business needs.