Corporate Dissolution

What is Corporate Dissolution?

Corporate dissolution refers to the legal process of dissolving or terminating a corporation’s existence as a legal entity. This process involves winding up the corporation’s business affairs, liquidating assets, and distributing the proceeds to creditors and shareholders. Under Florida law, corporate dissolution can occur in several ways, including voluntary, administrative, and judicial.

Voluntary dissolution occurs when a corporation’s shareholders vote to dissolve the corporation. On the other hand, administrative dissolution occurs when the corporation fails to maintain certain corporate formalities. Finally, judicial dissolution occurs when a court orders the dissolution of the corporation due to shareholder disputes, fraud, or other reasons.

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Which Florida and federal laws apply to corporate dissolution?

The Florida Business Corporation Act. (Florida Statutes Ch. 607) contains the state laws applying to corporate dissolution. According to this act, a dissolved corporation continues its corporate existence. Still, it may not carry on any business except that which is appropriate for winding up and liquidating its business affairs. The act also provides the process by which a corporation’s board of directors may propose dissolution. The shareholders must approve the dissolution proposal, or corporate dissolution can begin with the written consent of the shareholders.

What measures must a business take to execute corporate dissolution in Florida lawfully?

To properly execute corporate dissolution in Florida, the following steps may be helpful:

Notify the IRS: Corporations must notify the IRS by filing a final income tax return with the IRS. The return must indicate that it is the final return for the business, and it must include all income and deductions through the last day of the corporation’s existence.
Notify the state: Corporations must file articles of dissolution with the Florida Department of State, Division of Corporations, to formally dissolve the corporation. The articles must include the corporation’s name, date of incorporation, and a statement that the corporation has been dissolved.
Settle all obligations: Corporations must pay all taxes, debts, and other commitments before filing articles of dissolution. They must also liquidate all assets, distribute the remaining assets to shareholders, and cancel any contracts or leases.
Cancel licenses and permits: Corporations must cancel any licenses or permits issued by state or local agencies, such as business licenses or permits to operate machinery.

Businesses may also consider the following best practices when undergoing corporate dissolution in Florida:

Plan: Corporations should plan ahead for their dissolution, including creating a dissolution plan and identifying a point person to manage the process.
Maintain accurate records: Corporations should maintain correct financial and business records to help with the dissolution process.
Seek professional advice: Corporations should consult with an attorney, accountant, or other professionals to ensure they comply with all legal requirements.

What are common corporate dissolution issues that lead to litigation?

The following disputes are among the most common in actions regarding corporate dissolution in business process consulting matters:

Shareholder disputes: Shareholder disputes are common in corporate dissolution cases. These disputes may arise due to disagreements over the valuation of shares, the distribution of assets, or the corporation’s management. Shareholders may also dispute the terms of the dissolution itself, such as the timeline for winding up operations or the allocation of liabilities.
Breach of fiduciary duty: Directors and officers owe a fiduciary duty to the corporation and its shareholders. Allegations of a breach of this duty can arise in corporate dissolution cases, mainly if there is a dispute over the distribution of assets or the winding up of operations. In addition, a breach of fiduciary duty may occur if a director or officer prioritizes their interests over those of the corporation or its shareholders.
Creditor claims: A corporation’s creditors may file claims against the corporation during the dissolution process. Shareholders may dispute these claims, arguing that the creditor is not entitled to payment or that the amount claimed is incorrect. These disputes can lead to litigation if the parties cannot resolve them.
Tax liabilities: Corporate dissolution can trigger tax liabilities, notably if the corporation has not properly settled its tax obligations. Shareholders may dispute the amount of tax owed or who is responsible for paying the tax.
Winding down: Corporate dissolution involves the winding down of operations, which can be a complex process. For example, disputes may arise over the distribution of assets, the settlement of liabilities, and the timeline for winding down operations.

When addressing corporate dissolution, there are many paths a business may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek the best possible outcome.

To determine whether your unique situation may necessitate further legal action, please contact our office to set up your initial consultation.

Frequently Asked Questions

What is the process for dissolving a Florida corporation?

Dissolving a Florida corporation typically involves obtaining approval from the corporation’s directors or shareholders, filing the Articles of Dissolution with the Florida Department of State, and winding down the corporation’s business affairs. Before the vote, the board of directors must submit a proposal to dissolve the shareholders, and the shareholders must approve the dissolution. Ten days advance notice of the proposed dissolution must be given to each shareholder, whether or not they may vote.

2. What are the tax implications of dissolving a Florida corporation?

Dissolving a Florida corporation can have tax implications for the corporation and its shareholders. Generally, the corporation must file its final tax return and pay any taxes owed before dissolving. In addition, shareholders may also have to report any gains or losses resulting from the distribution of assets during the dissolution process.

3. Can a Florida corporation be reinstated after dissolution?

Yes, a Florida corporation can revoke its dissolution at any time before the expiration of 120 days following the effective date of the articles of dissolution. In addition, if the corporation was administratively dissolved, it may submit an electronic reinstatement application to the Florida Department of State.

Have more questions about a corporate dissolution-related situation?

Crucially, this overview of corporate dissolution does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.