Why You Should Dissolve Your Unused Corporation
All good things must eventually come to end. This is true in all facets of life, and the life of your Ohio corporation is no different. Although corporations can exist into perpetuity in Ohio, there are times when your corporation may cease to serve any purpose, such as after a sale of your corporation’s assets in a business sale, after a corporate restructuring, or simply because you desire to wind up your business operations all together. Whatever the reason, it is important to take the steps to formally dissolve your Ohio corporation with the Ohio Secretary of State.
Why do I need to formally dissolve my corporation?
The key benefit to corporate dissolution is that it cuts off any claims against your corporation that are not made before its formal dissolution date, as well as ending any chance of the corporation incurring any sort of financial or legal liability. If your corporation has ceased its operations but continues to exist as a legal entity, it can incur legal liability and leave open the door for creditors to make a claim against the corporation. A formal dissolution of your corporation puts the world on notice that you are winding up your business. This allows any creditors to make claims and for you to ensure that all loose ends are tied up. During the dissolution process, you also give the State of Ohio the opportunity to clear up any outstanding tax matters involving your corporation.
Starting the Dissolution process
You should begin your dissolution process by speaking with your corporate accountant and legal counsel. This will give you an idea of what outstanding financial and legal liabilities your corporation may have. With this information, you can begin taking steps to pay off any potential obligations the corporation may have and wind up its business as needed. It is crucial to try and resolve any outstanding obligations before the formal process begins, as it will make the approval of your dissolution a much easier process later.
Obtaining State of Ohio Tax Clearance
To start the formal dissolution process, you must first obtain a Certificate of Tax Clearance from the Ohio Department of Taxation. This is done by filing a request for tax clearance with the Department of Taxation. In the request for tax clearance you must list various tax information that allows the State of Ohio to review your corporation’s tax history in order to confirm that your corporation does not have any outstanding tax liabilities or unfiled tax returns. If the State of Ohio finds that your corporation has any outstanding tax liabilities or unfiled tax returns, your corporation will have the opportunity to get its tax status in compliance. The tax clearance step is very important, as you cannot file for formal dissolution of your corporation until the Department of Taxation certifies that you have no outstanding tax liabilities or unfiled tax returns. Once you have tax clearance from the Department of Taxation, you can move on to the formal dissolution process.
Filing for Dissolution
After the Department of Taxation issues a Certificate of Tax Clearance, you can proceed with dissolving your corporation with the Secretary of State by filing a Certificate of Dissolution. The Certificate of Dissolution mandates that you provide notice of the dissolution to any possible creditor who may have a claim against your corporation and give them at least sixty (60) days to send their claim. You must also provide formal notice of dissolution to the Ohio Department of Job and Family Services and the Bureau of Workers’ Compensation, among other requirements.
After the Ohio Secretary of State has reviewed and approved your dissolution, you will receive a Certificate of Dissolution back attesting that your corporation has been dissolved.
Final Steps
You are advised to work with your corporation’s accountant to file final tax returns and to wrap up any other matters with the IRS. Moreover, if your corporation had an unemployment account or workers’ compensation account, those accounts should be deactivated with the Ohio Department of Job and Family Services and your account with the Ohio Bureau of Worker’s Compensation.
If you are considering dissolving your corporation and want to evaluate your options, or if you have any other questions related to business, please feel free to reach out to FGKS Law with any questions.
