Owning and operating your own business can be extremely fulfilling. However, no matter how successful your business is, there may come a time when you decide it’s time to close shop and dissolve the entity. 

In fact, there are many reasons to consider closing and dissolving a business. For example, dissolution might be an option when you want to avoid bankruptcy, when partners want to retire, or when an owner wants to start a new business venture entirely. 

Dissolution is an important part of the business lifecycle. No matter what the business’s financial situation is or what debts it may have, properly dissolving the business is crucial for a few reasons: 

  • If the business isn’t dissolved correctly, the state will still expect taxes, annual reports, and other information from the entity.
  • Failure to dissolve the business can result in potential fines and other financial penalties for both the entity and its individual owners.
  • Improper dissolution, or failure to dissolve at all, can negatively impact credit and the future business ventures of individual members and owners.

As you can see, correctly and timely dissolving your business is essential. It’s also important to do everything right from the start to prevent difficulties later on in the business lifecycle. For those looking to form a business in Alabama, use our limited liability company formation and corporation formation services to help you start off on the right foot.

Before dissolving your Alabama business

Before dissolving your Alabama business, there are a few things to do first. You will want to establish a secure and thorough record of all of your corporate or LLC records and dealings. While it might feel tedious to put in more time just to close your business, doing this work now will save you time and effort later. 

Not sure where to begin? Use our guide below to learn more about the dissolution process in Alabama and what we can do to make this as smooth and efficient as possible.  

Step 1: Establish a valuation of your Alabama business

The first step in any business dissolution is to establish an accurate valuation of your Alabama business entity. 

To do this, you’ll want to gather accurate information about all your business assets, including real estate, inventory, and everything else that holds value for your business. Any documents related to your business operations, including contracts with third parties and tax information, will also be essential to establishing an accurate valuation. Importantly, don’t be afraid to hire a professional if you’re not sure how to value certain parts of your business. 

Use our Worry-Free Compliance service and our easy-to-use dashboard to help keep your business documents organized and make gathering your business information easier.

Step 2: Compile a full account of your Alabama business’s debts

Next, compile a complete accounting of all the debts for your business. Essentially, you’ll want to determine how much money you owe and to whom. Just because you’re wrapping up your business doesn’t mean that you automatically get to erase all your business debts. In fact, there can be serious legal repercussions for failing to pay any remaining business debts, including the potential to be held personally liable. 

Step 3: Identify Alabama’s official dissolution document

Now you’re ready to identify your state’s official dissolution document. In Alabama, this is called the Articles of Dissolution for both limited liability companies (LLCs) and corporations. 

Articles of Dissolution for an Alabama business must include certain information such as: 

  • The name of the entity
  • The date of the filing of the Certificate of Formation for the business
  • The reason for filing the Articles of Dissolution
  • The effective date of the articles, if not immediate
  • Employer Identification Number (EIN)

In Alabama, you’ll submit your business filings, including these Articles of Dissolution, to the Alabama Secretary of State. This can be done either by mail or online.

Step 4: Follow instructions in your Alabama business’s operating document

You’ll also want to make sure to also follow your business’s governing document, if it has one. Alabama law does provide default rules for dissolution for businesses that don’t have governing documents, but these might not be the best practice for your business. LLCs should have an operating agreement, and corporations should have bylaws. With these documents, you can dictate specific rules and procedures for dissolving the entity. 

If you have an LLC but don’t know where to start when drafting an operating agreement, you can use our operating template to get the ball rolling. This allows you to fit your governing document to your needs and can help make dissolution easier if and when it becomes necessary. And always remember — no matter what your governing documents say, you must still remember to file the proper dissolution paperwork required by the state. 

Step 5: Cancel your Alabama business’s permits, licenses, and registrations

Many businesses will require some form of licenses or permits at the federal, state, and even local levels. These typically have to be renewed periodically. 

However, once you dissolve your business, you won’t need those licenses anymore. Some of your licenses and permits might be set to renew automatically. Thus, make sure to do some research and cancel these so you don’t end up paying for them. 

Now you’re ready to start wrapping up your business’s various legal and financial obligations. 

For example, if your business has employees, make sure you abide by all federal and state laws and regulations regarding final payments or other earned benefits to employees. You’ll also want to file your final tax returns and then cancel your EIN. 

Step 7: File the Articles of Dissolution for your Alabama business

Finally, you can proceed with filing the Articles of Dissolution for your business with the State of Alabama. You’ll also need to pay the appropriate filing fee. All this can be done either by mail or using the Alabama Secretary of State Online Services. 

Upon dissolution of the business, the entity may no longer carry on any business activities, except as necessary to wind up and liquidate its affairs, including: 

  • Collecting assets
  • Disposing of property
  • Discharging its liabilities
  • Distributing any remaining property among members or shareholders

By following the previous steps in this guide, you can better ensure that the final winding up of your business goes as smoothly as possible. 

Let us help you run your Alabama business from formation and beyond

Closing up shop and formally dissolving your business can be an emotional process. Nevertheless, it’s a necessary step for many businesses. Thus, it’s important to know how to do so correctly. No matter where you are in the entity lifecycle, we’re here to help you with your Alabama business’s needs. 

Dissolution FAQs

  • To dissolve your Alabama business, you’ll need to file Articles of Dissolution with the Secretary of State. However, don’t forget to get your affairs in order well before then so that you have everything you need to properly and efficiently proceed with your dissolution.

  • Fees are always subject to change. Thus, make sure to check periodically with the Alabama Secretary of State to ensure that you have the most up to date filing fee information.

  • In most cases, the Articles of Dissolution will be effective immediately upon the date of acceptance by the state, unless another date is specified in the Articles of Dissolution filing.

  • While there is a separate form for dissolution of a nonprofit corporation in Alabama, the process is essentially the same as for a for-profit corporation.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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