Steps to Dissolve Your North Carolina Business
- Establish a valuation for your North Carolina business
- Compile a full account of your North Carolina business’s debts
- Identify North Carolina’s official dissolution document
- Follow instructions in your North Carolina business’s operating document
- Cancel your North Carolina business’s licenses, permits, and registrations
- Wrap up your North Carolina business’s legal and financial obligations
- File Articles of Dissolution for your North Carolina business
When a business decides to close up shop, it must undergo certain steps to finalize its legal obligations. This legal process is called dissolution. It’s generally the same regardless of whether you dissolve a North Carolina business for positive or negative reasons. If a business doesn’t dissolve properly, it can continue to accrue commercial operating costs (e.g., utilities bills, software subscriptions, etc.) and government fines and fees (e.g., tax assessments, permit renewals etc.). It may also be exposed to lawsuits and judgments. If these accumulating debts aren’t addressed, the owners of the business may ultimately become personally liable. In addition, a drifting and improperly closed business, with its many accruing liabilities, can affect an owner’s credit rating and also their ability to engage in future investments and obtain financing.
If you’re at the stage where you want to start a business rather than dissolve one, please let us help you with our North Carolina Corporation Formation Service or Limited Liability Company (LLC) Formation Service.
Before you dissolve your North Carolina business
Businesses that exist as corporations or LLCs are legally their own person. These entities bring the benefit of limited liability to their owners. To preserve that benefit, the owners need to respect the personhood of the business. A business’s personhood is best respected by conducting all the business’s affairs in its name and keeping good company records of those activities. Bear in mind that these activities can be both internal (e.g., the appointing of a new president) or external (e.g., the signing of a lease). Therefore, before you begin to dissolve your business, gather into one place all its existing business records (internal and external). It’s easier to have them readily available during the dissolution process rather than look for or generate them on the fly.
Step 1: Establish a valuation for your North Carolina business
To properly dissolve a North Carolina business, you need to know what it’s worth. A business is almost always valued by its tangible assets (inventory, office equipment etc.). However, intangible assets (patents, trademarks etc.) can also contribute to business value, particularly if they can be easily transferred or sold.
Another important part of valuing your business is to gather all tax documents. Tax treatment of business assets can be important in determining business value. If this seems overwhelming, we completely understand and recommend that you hire a professional to help you, such as an accountant or appraiser. Gather all the documents related to the business’s assets (e.g., titles, bills of sale etc.) into one place and have them easily accessible. The value you determine in this Step will help in making payments and distributions to creditors and owners in Step 6.
Step 2: Compile a full account of your North Carolina business’s debts
Dissolving a business requires bringing commercial relationships to a final conclusion, and the most common way to do that is to make sure all outstanding commercial debts are paid. Compile a list of all the business’s creditors and the amounts owed to each of them. You will use this list in Step 6 when you give notice to creditors of the business’s dissolution. Generating an accurate list is a very important step to shutting off potential personal liability of the owners. If the list leaves off creditors that should have been on it, then those creditors could seek payment from the owners.
It’s important to point out that even if your business is a corporation or LLC, and therefore its own person, it can’t simply shut its doors and stop paying its debts. The law generally requires that all dissolving businesses pay their valid debts. If a dissolving business doesn’t address these debts, then the owners may be personally liable.
Step 3: Identify North Carolina’s official dissolution document
To dissolve a business, whether a corporation or LLC, you file Articles of Dissolution in North Carolina with the Secretary of State. However, the State provides a separate document for each.
You can file your North Carolina voluntary dissolution documents by mail or online. The mailing address is on the bottom of the dissolution document, and for online filing you can go to the online Business Registration section of the North Carolina Secretary of State. Just be sure to select the right entity to find the right online dissolution form.
Step 4: Follow instructions in your North Carolina business’s operating document
Most corporations and LLCs have a governing document that will instruct them how to initiate and approve a dissolution. For corporations, the document is called the bylaws, and for an LLC it’s called the operating agreement. Review the procedures in your governing document and follow it. It’s good business practice to record all this activity in writing and file it away with other important business documents. In addition to following your governing document, it’s important to follow the North Carolina statutes for either corporations or LLCs when dissolving your business. If you don’t have a governing document for your business, then the North Carolina statutes are the only authority you need to follow for dissolution.
If you’re looking to draft an operating agreement but don’t know where to start, we can provide you with an Operating Agreement Template. Having this document for your business can make dissolution a more simple process.
Step 5: Cancel your North Carolina business’s licenses, permits, and registrations
A business that has been operating in commerce for any period of time usually has some sort of license, permit, or registration. Many of these are acquired at the start of a business and may have automatic renewals. Therefore, it’s important to check with state, county, or city governments to make sure that you have found all of your licenses, permits, and registrations. Once you have identified them, file the proper documents to cancel all business licenses, permits, and registrations. Failure to cancel them can result in accumulating fees and fines that, if unaddressed, could end up as personal liability to the owners.
Step 6: Wrap up your North Carolina business’s legal and financial obligations
At this point, you’re ready to tell creditors that your business is dissolving. North Carolina law requires that you give creditors notice of dissolution and a period of time for them to file a claim with your business. Generally, the notice period for creditors is between 90 and 120 days, but make sure to check the North Carolina statutes for the right notice period. If you dissolve your business before the notice period is up, creditors may go after the owners personally for the business debt. If a creditor makes a claim for payment, you will need to decide whether you should pay. If there are any assets after paying creditors, you can consider distributing them to the owners. These are very important decisions, and we encourage you to seek professional advice.
Next, file all the proper final tax returns with the North Carolina Department of Revenue. Included in that filing, make sure to cancel any state tax identification numbers. You also need to file with the Internal Revenue Service and cancel your federal tax identification number.
Step 7: File Articles of Dissolution for your North Carolina business
While filings for dissolution are similar in North Carolina for corporations and LLCs, be sure you select the right entity form for your business as stated in step 3.
Let us help keep your North Carolina business running smoothly
With our various services, from corporate and LLC formation, to Worry-Free Compliance and our Business License Report, we can help you operate a smoothly running business and keep proper records of compliance obligations.
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.
- How do I dissolve a business in North Carolina?
To dissolve a North Carolina business, file Articles of Dissolution with the North Carolina Secretary of State. Make sure to file the proper documents for the type of business entity you have (e.g., corporation or LLC).
- How much does it cost to dissolve an LLC in North Carolina?
Filing fees are subject to change, but the North Carolina Secretary of State maintains a current fee schedule on its website.
- How long does it take to dissolve an LLC in North Carolina?
It will take approximately 4-5 business days to dissolve a North Carolina LLC. Keep in mind that it’s best to wait until your creditor notice period expires.
- How do I dissolve a nonprofit organization in North Carolina?
You dissolve a nonprofit organization in a similar way as a for profit organization. However, you must attach a Plan of Dissolution to the Articles of Dissolution.