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Dissolve My Corporation: Always A Difficult Decision

May 26, 2008
Before you can say, dissolve my corporation, the company must have gone through the process of incorporation, a legal process by virtue of which a business comes into legal existence. This legal existence in which the business takes birth is referred to as a 'corporation' or a 'company'.

Corporation is also known as a company in many jurisdictions. Both words have the same implications and represent a body incorporated under the relevant company laws. Incorporation is abbreviated as Inc. and company is abbreviated as Co.

An incorporated entity which is also known as company or corporation is recognized by the law as a separate legal entity from its owners. A new artificial juridical person is born with the formation of a company.

As the company is a legal juridical person it can sue anybody and can be sued by anybody in its own name. It has perpetual succession and can have both limited and unlimited liability for its owners. The owners of a company or a corporation are called shareholders.

When a child is born a certificate of birth is issued which is the evidence of the birth of the child on the mentioned date and place. Similarly a certificate of birth is issued by the regulatory authorities to mark the birth of the company or corporation. This certificate of birth is usually known as 'Certificate of Incorporation'.

Dissolution is a process exactly opposite to incorporation. When I decide to dissolve my corporation the life of my corporation or company ends and the artificial juridical person created by its incorporation dies.

When a person dies a certificate of death is issued to mark the date of his death, the place where he died, his age and the cause of his death if determinable. Similarly a certificate of death is issued when you decide to dissolve my corporation. This certificate of death is called 'Certificate of Dissolution' of a company.

According to a reputed online legal dictionary, dissolution of corporation means termination of a corporation, either voluntarily or by state suspension. Voluntary dissolution is done by means of passing a resolution to this effect by the board of directors and the shareholders of the corporation, paying off all debts, distributing assets, and filing dissolution documents with the relevant authority.

There is also the considerable issue of firing all employees, working with customers to seek new suppliers and dealing with the impact the closure has on other stakeholders of the company.

On the other hand dissolution by state suspension is usually done by the state when the corporation is not paying corporate or other state taxes.

If you are wondering whether you should dissolve your corporation or not you should ponder upon the fact that if you need to run this business in the future or not, and if you can find the resources you need to continue at present. If you are planning a temporary closure, the decision to dissolve your corporation will not be suitable.

But if you are planning to formally close your corporation or company and discontinue to its business forever and do not want to use the corporation or company in any way in future, then you should take the decision to dissolve your corporation as it is the right decision in the circumstances, difficult and expensive as it may be.

In order to dissolve your corporation you will have to take approval from the shareholders in a general meeting. If the shareholders approve the resolution to dissolve the company the authorized member, director or officer will file a 'Certificate of Dissolution' or 'Certificate of Cancellation' after with the relevant authorities.

If all requirements are fulfilled the 'Certificate of Dissolution' or 'Certificate of Cancellation' will be certified and registered with the registrar of companies, and the company will proceed with the winding up of its assets and members will be given there respective proceeds from the company's assets if any are left after clearing company's liability.

Of course in most cases, especially for large companies, because of the large number of disgruntled stakeholders whose livelihood gets effected, this process lands up in bankruptcy courts and the dissolution only comes into effect via a court order.

Sometimes, therefore it is easier to sell the company to even your competitor than to go through this tedious process and utter the brave words: 'dissolve my corporation'.
About the Author
Ramapati Singhania specializes in creating and managing web businesses. His latest website http://www.incorporation-offshore-saves-wealth.com focuses on helping you to incorporate offshore companies in Seychelles, Mauritius and BVI. You can also visit his blog, http://www.ramapatisinghania.com
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