Business Dissolution
Closing a business involves more than locking the doors. A Colorado company which simply stops operating remains on the state’s records, and its owners can remain exposed to claims that a proper dissolution would have resolved. Dissolution is the formal process of ending the company: deciding to dissolve, winding up its affairs and filing the necessary statements with the Secretary of State.
The Steps
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Authorization. The owners approve the dissolution as the operating agreement or bylaws require (or, where those documents are silent, as Colorado statute provides).
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Filing. The company files a statement of dissolution with the Colorado Secretary of State.
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Winding up. The company collects what it is owed, sells or distributes its remaining property, and pays or makes provision for its debts. Colorado law provides a procedure for giving notice to known creditors and publishing notice to unknown claimants, which limits the time in which claims can be brought against the dissolved company.
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Distribution. Whatever remains after creditors are paid is distributed to the owners according to the governing documents.
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Loose ends. The company files its final tax returns, closes its accounts, and cancels its licenses, trade names and sales tax registration.
Dissolution Among Owners Who Disagree
Where the owners do not agree on closing the business (or on how the remaining property should be divided), the operating agreement usually controls, and an agreement that addresses buyouts can often avoid a dissolution altogether by letting one owner buy out the other. Where there is no such agreement, the dispute may require a negotiated separation, and we will advise you on the options.
Administrative Dissolution and Reinstatement
The Secretary of State administratively dissolves companies that fail to file their periodic report or keep a registered agent. A company in that position can usually be reinstated by curing the problem and filing for reinstatement, and we handle reinstatements for companies that want to continue operating.
If the business is being sold instead of closed, see Business Sale or Purchase. For a new venture, see Business Formation.
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