Steps to Dissolve Your Texas Business
- Establish a valuation of your Texas business
- Compile a full account of your Texas business’s debts
- Identify Texas’s official dissolution document
- Follow instructions in your Texas business’s operating document
- Cancel your Texas business’s permits, licenses, and registrations
- Wrap up your Texas business’s legal and financial obligations
- File Certificate of Termination for your Texas business
There may come a time when you need to dissolve your Texas business. Whether you’re facing financial difficulties, at odds with your business partners, or want to retire, there are plenty of reasons why closing a business becomes necessary.
It’s important to dissolve your Texas business properly. If you don’t, you could face potential liability. With our step-by-step guide below, we’ll explain how to dissolve a business in Texas.
Before dissolving your Texas business
The Texas voluntary dissolution process requires multiple steps. You’ll need lots of information and details about your Texas business to get through the entire process. This is why it’s so important to have your business documents readily available. When you use our Worry-Free Compliance Service, we organize your business’s documents on our dashboard. That way you have access to whatever information you need at a moment’s notice.
Step 1: Establish a valuation of your Texas business
Valuing your business is an important first step in the dissolution process because it gives you a financial snapshot of your company. Knowing the business’s economic worth allows you to see how much is available to satisfy debts, and what may be left over to distribute.
To value your company, you need to account for all business assets and liabilities. Assets include things like real estate, inventory, equipment, accounts receivable, cash, and more.
During the valuation phase, you want to gather any documents related to business operations, especially contracts with third parties and tax information. Don’t forget, if you use our Worry-Free Compliance service, we keep your business documents organized and available to you on your personalized dashboard.
Don’t panic if this whole valuation step makes your head spin. You can always call in a valuation expert if you’re not sure how to value your business.
Step 2: Compile a full account of your Texas business’s debts
Business debts are an important part of valuing a company. Create a list of how much you owe and who you owe it to. Remember, just because you’re closing up shop doesn’t mean your business debts go away. There are significant legal and financial repercussions to leaving debts unpaid, such as potential personal liability. Again, if this is an area that you’re unsure about, call in a professional to help.
Step 3: Identify Texas’s official dissolution document
To officially dissolve your Texas business, you need to file dissolution paperwork with the Texas Secretary of State. Knowing what information you need to complete the forms will make the filing process smoother and quicker.
The Texas Secretary of States handles all business filings. The office accepts filings via mail, hand delivery, fax, and online submission. Be sure to include the appropriate filing fee or the office won’t accept your documents.
To dissolve a Texas LLC or dissolve a Texas corporation, you need to file a Certificate of Termination. This document requires the following information:
- Business name
- Entity type
- Date of business formation
- File number issued by the Secretary of State
- Names and addresses of entity’s governing persons
- Type of event requiring the business termination
- Date document goes into effect
- Authorized signature
Unless the entity is a non-profit corporation, you also need to attach a Certificate of Account Status for Dissolution or Termination. The Texas Comptroller of Public Accounts issues this certificate, which certifies that the entity is current on all state tax payments. This certificate is necessary to legally dissolve a Texas business, including for-profit corporations and LLCs.
If you’re dissolving a nonprofit corporation, there’s a specific Certificate of Termination form to file. Nonprofit corporations are the only entity types that don’t need to include a Certificate of Account Status to dissolve.
Step 4: Follow instructions in your Texas business’s operating document
Next, it’s time to look at your business’s operating document. LLC’s call it an operating agreement and corporations refer to it as their corporate bylaws. Whatever the name, an operating document is incredibly important because it sets the rules for how a business functions. From director’s duties to voting procedures, the operating document is where you look for guidance on any business matter.
Most operating documents include dissolution instructions. Typically, you’ll need unanimous consent of either the members, shareholders, or board of directors to dissolve the company. Don’t worry if your Texas business never adopted an operating agreement. In that case, you simply need to follow the dissolution requirements under Texas law.
Ultimately, no matter what the operating agreement or bylaws say, you must file the proper dissolution paperwork with the state to legally dissolve.
If your Texas LLC needs an operating agreement, we can provide you with an operating agreement template during the formation process. So when forming your next business, you can specify the dissolution process you wish to use.
Step 5: Cancel your Texas business’s permits, licenses, and registrations
To do business in Texas, it’s likely you have some combination of business permits, licenses, registrations, and certificates. It’s your responsibility to cancel any such licenses by contacting the appropriate federal, state, or local agency. If you don’t do this, you might be automatically charged for the renewal of a license or permit you no longer need.
Step 6: Wrap up your Texas business’s legal and financial obligations
Filing dissolution documents only dissolves your business on paper. You still have to handle a host of other business matters. Your to-do list will likely include:
- Notifying the IRS that you’re dissolving
- Filing a final tax return (both federal and state)
- Cancelling the business’s Employment Identification Number (EIN)
- Notifying creditors and paying debts
If applicable, you also need to comply with federal and state laws regarding paying employee wages and other earned benefits after dissolving.
Step 7: File Certificate of Termination for your Texas business
By filing a Certificate of Termination with the Texas Secretary of State, you legally and officially dissolve your business. This office will provide you with confirmation of filing and include a file-stamped copy of the Certificate of Termination.
Once the paperwork is filed, your company can no longer conduct business, but it does still exist for the purpose of wrapping up any remaining business matters. For example, you may need to close the business bank account or distribute leftover assets to yourself and any other owners.
We can help you throughout the life of your Texas business
There are a lot of components involved with starting and running a Texas business. The same is true for terminating that business. Of course, the more organized you are throughout the operation of your business, the easier it’ll be to dissolve it. But no matter where you are in your Texas business’s lifecycle, we are here to support you every step of the way from start to finish with our business formation and compliance services. Contact us today to see how we can help make running your business in the Lone Star State smoother.
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 Texas?
To dissolve a business in Texas, you need to follow several steps. Start with a valuation of your business. You must then get the necessary approval to dissolve, wind up legal and financial obligations, file a Certificate of Termination, and close out any remaining business matters. There are steps within each step, so this is quite a general overview.
- How much does it cost to dissolve an LLC in Texas?
The cost to dissolve a Texas LLC varies. For example, if you hire an accountant and valuation expert to help you dissolve, your costs will be much higher than someone who doesn’t.
In terms of filing fees, these amounts can change. It’s best to check the Secretary of State’s fee schedule for the most current filing fees.
- How long does it take to dissolve an LLC in Texas?
This depends on how long it takes to complete each step of the dissolution process.
In terms of processing the dissolution documents, online filing takes four days. The processing time for all other filing methods varies based on the Secretary of State’s workload at the time.
- How do I dissolve a nonprofit organization in Texas?
Dissolving a nonprofit organization in Texas is generally the same as dissolving a for-profit organization. You need to get the required approval to dissolve the company, wind up the business’s affairs, and file a Certificate of Termination. The main difference is that nonprofit organizations don’t need to include a Certificate of Account Status.