CORPORATION

For some small business owners, the time comes when they must end
operations and dissolve their business. Its a stressful time and a multi-step process.
There are six common steps to dissolving a business .

Step 1: Corporation or LLC action

Company owners must approve the dissolution of the business. With

corporations, the shareholders must approve the action; with limited liability
companies (LLCs), members grant approval. For small businesses,
shareholders or members are often involved in day-to-day operations, and
typically know the circumstances. The bylaws of a corporation and the LLC
operating agreement typically outline the dissolution process and needed
approvals. To comply with corporation formalities, the board of directors
should draft and approve the resolution to dissolve. Shareholders then vote
on the director-approved resolution. Both actions should be documented and
placed in the corporate record book. While LLCs are not subject to the same
formalities, documenting the decision and member approval is
recommended.

Step 2: Filing the Certificate of Dissolution with the state

After shareholders or members have voted for the dissolution,

paperwork must be filed with the state in which the business was
incorporated. If the company qualified to transact business in other states,
paperwork must be filed in those states, too.

The process for filing the Certificate of Dissolution (also called Articles
of Dissolution) varies by state. Some states require filing documents
before notifying creditors and resolving claims; others require filing
after that process.

Certain states require tax clearance for the company before the
Certificate of Dissolution can be filed. In these cases, any back-taxes
owed by the corporation or LLC must first be paid.

Contact your online incorporator, registered agent or Secretary of

State's office to learn more.

Step 3: Filing federal, state, and local tax forms

Although youre ending operations, your tax obligations do not

immediately cease. You must formalize the business closing with the IRS as
well as your state and local taxing agencies. The IRS website includes a
business closing checklist, which indicates the required forms and links to
additional state and local requirements. Remember payroll reporting
obligations if you have employees. Be sure to consult your accountant or tax
adviser on your particular requirements.

Step 4: Notifying creditors your business is ending

You must notify all of your company's creditors by mail, and explain:

That your corporation or LLC has been dissolved or has filed the
statement of intent to dissolve

The mailing address to which creditors must send their claim(s)

A list of the information that should be included in the claim

The deadline for submitting claims (often 120 days from the date of
the notice)

A statement that claims will be barred if not received by the deadline

Your state may allow for claims from creditors that are not known to
the company at the time of dissolution. You may be required to place a
notice in the local paper about your company's dissolution. When in doubt,
ask an attorney about what your state mandates.

Step 5: Settling creditors' claims

Creditor claims can be accepted or rejected by your company.

Accepted claims must be paid or satisfactory arrangements made with
creditors for repayment. For example, a creditor may agree to settle the
claim for less (such as 80%) than the original amount. With rejected claims,
you must advise creditors in writing that your company rejects their claims.
Be sure to have an attorney assist and advise you about the process and
your state's related statutes.

Step 6: Distribution of remaining assets

After paying claims, remaining assets may be distributed to company

owners in proportion to the share of ownership. For example, if you own 80%
of the business and your brother owns 20%, you receive 80% of the
remaining assets. Distributions must be reported to the IRS. If your
corporation has multiple stock classes, corporate bylaws typically outline the
procedure for distributing assets to these shareholders. For details on
distribution and your ongoing contingent liabilities, contact an accountant or
tax adviser.

Partnership

FIVE Key Steps in Dissolving a Partnership

Do you know how to dissolve your partnership? If you feel as though
you've come to the point in your business where you're ready to wind down
and close, it's best to be prepared. Closing a business is not as simple as just
ceasing all operations and leaving.

However, dissolving a partnership doesn't have to be too difficult

either. Just keep in mind these five key steps when dissolving a partnership:

1. Review your partnership agreement. While some partnerships don't

require a formal or written agreement, most partners choose to have one
anyway for protection. If your partnership has no partnership agreement,
then all you need to do is give notice to your partner. If there is a written
agreement, you'll need to review it to ensure that you follow the protocol
outlined in it -- usually, there's a clause that requires a majority vote of some
sort to dissolve.

2. Discuss with other partners. It's best to make sure that you and all your
other partners are on the same page. This includes discussing particular
obligations such as debts and future liabilities. You may want to outline your
plan for dissolution in a meeting to ensure that a satisfactory resolution is
reached.

3. File dissolution papers. While it may not be required, it's a good idea to
file a dissolution of partnership form with the state to formally announce and
 give notice of your partnership ending. Doing so can help you resolve any
issues involving further obligations or debts with the partnership.

4. Notify others. Make sure you also notify other parties of the dissolution.
This includes your landlord, your employees, your customers, and any other
government entities (including the IRS) that have registered your business or
issued you a license.

5. Settle and close out all accounts. Make sure that all your creditors are
notified and that your debts are all paid off or settled. Lastly, you'll want to
distribute all your assets accordingly (usually in accordance with the
partnership agreement, or whatever you and your partners have otherwise
agreed upon) and make sure that all relevant bank accounts are closed.

Lastly, don't forget that it's always best to consult with an experienced
business lawyer. Because certain rules vary by state, you'll want to ensure that
you're upholding all your legal obligations and that all steps are properly taken.