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If you are a shareholder in a corporation (or a member in an LLC) that wi=
ll
no longer continue operations in/after 2006, we STRONGLY urge you to COMP=
LETE
the process of dissolving your business BEFORE
January 1, 2007. Failure to dissolve a corporation or LLC BEFORE January =
1,
2007 could result in the following:
Tax Filings.=
The company =
may be
required to prepare and submit tax returns to the IRS, the state, =
and
other municipal taxing authorities.
Personal Liability.=
Individual
shareholders or members may be PERSONALLY liable for the entity's debts a=
nd
tax liability.
Annual Reports. The entity m=
ay be
required to prepare an annual report for 2006 along with tax payments &am=
p;
penalties.
No Distribution of =
Assets. Corporate/LLC
assets may NOT be distributed to shareholders/members until the entity is
properly dissolved.
Future Product Liab=
ility. An entity th=
at is
not properly dissolved may carry potential future liability from the prod=
ucts
and services sold by the entity while it was operating.
ALL
of the following steps must be COMPLETED before a corporation will be
considered properly dissolved.
1.=
Formal Corporate Action
2.=
Filings with State Offices
3.=
Statutory Notice to Creditors
4.=
Processing Creditor Claims
5.=
Sale=
and Distribu=
tion
of Remaining Assets
The Board of Directors of the corporation must first propose a corpo=
rate
dissolution. Corporate minutes must be recorded and maintained in the
corporate book by the corporation's secretary.
Once the proposal has been recorded, a majority of shareholders must
approve the dissolution action as proposed by the Board of Directors.
Please note, some states require that at least 2/3rds of all voting
shares must approve the proposed action for corporate dissolution.
NOTE: The corporation must file IRS Form 966 within 30 days after the
adoption of a resolution or plan to dissolve a corporation.
Since state laws regarding corporate dissolution vary amongst the
states, we STRONGLY urge you to consult with an attorney or accounta=
nt
regarding your state's particular requirements for your situation. <=
o:p>
3. Statutory Notice to Creditors.=
"KNOWN Claimants"
All KNOWN creditors and claimants of the corporation must be provided with
notice of the pending corporate dissolution.
What Information Must the Notice Contain?
- A statement that the corporatio=
n has
been dissolved or will be dissolved.
- A mailing address where a credi=
tor
may send his/her claim.
- A request for the information t=
hat
must be included in a claim.
- The deadline for submitting a c=
laim
(usually 120 days from the date of the notice).
- A statement that a claim will be
barred if it is not received by the stated deadline.
"UNKNOWN
Claimants"
In some states, notice must be given to creditors who are NOT KNOWN to the
corporation at the time of dissolution (e.g. a consumer who injured herse=
lf
on one of the corporation's products years after the dissolution was
completed).
In most cases, such notice may be published in a local newspaper where the
corporation's PRINCIPAL OFFICE is located. If the corporation's principal
office is out of state, the notice must be published in the local newspap=
er
where the corporation's registered agent WITHIN THE STATE OF DISSOLUTION =
is
located.
What Information Must the Notice Contain?
- Effective Date of Dissolution. =
- Mailing Address for creditor cl=
aims.
- A request for the information t=
hat
must be included in a claim.
- A Statement that a claim will be
barred unless the claimant files an action to enforce his claim within th=
e
statutory period (us=
ually
5 years)
Where a claim is ACCEPTED, arrangements for payment should be made. Where=
a
claim is REJECTED, however, the corporation must advise each creditor IN
WRITING of the rejection.
Each rejection letter should state that the rejected claim will be barred=
by
statute unless the creditor commences an action to enforce the claim with=
in
the period set by state statute (usually 90 days from the date of the
rejection letter ... once again.... check with your attorney!!!)
After all claimants have been satisfied, the corporation's remaining asse=
ts
may be distributed to shareholders. Such distributions to shareholders mu=
st
be reported to the IRS via Form 1099-DIV.
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