Five Things You Should Know About Corporate Dissolutions

While few people create a corporation with the intent of eventually closing, the fact of the matter is that only half of all businesses survive their fifth year, and only about a third last more than ten years, according to the Bureau of Labor Statistics. This unfortunate reality means that many corporations will face dissolution before they can become sustainable, long-term businesses. Here are five things you should know about corporate dissolutions if you own or operate your own corporation:

1. Corporate Dissolutions Are Sometimes Voluntary

While most corporate dissolutions are the result of insolvency due to poor earnings or overwhelming debt, that is not always the case. In some circumstances, people will prefer to dissolve their business rather than simply sell it off or leave it to someone else. This allows a corporation's ownership to end the business on their own terms, rather than seeing it placed in the hands of others who may not handle things the way they would like.

2. Dissolutions Involve Settling All Accounts

The most important element of dissolving a corporation is settling all accounts. This means paying off any creditors (insofar as that is possible), while also collecting on any outstanding debts. The goal of this process is to make sure there are no remaining obligations left over once the process of dissolution has been completed. This is also where many assets get lost — and where asset recovery services become critical.

3. Dissolutions Can Be Extremely Complicated

The process of dissolving a corporation is usually not an easy one, especially if the company has a large number of assets or a complex corporate structure. Sorting out the bureaucratic complexities can often take years, with legal matters potentially outlasting the existence of the corporation itself. It can become even more complicated if there is litigation related to the corporation, which can significantly impact the process of dissolution.

4. Mishandled Dissolutions Create Serious Problems

It is essential, when engaging in a corporate dissolution, to ensure it is done with absolute care. When corporate dissolutions are mishandled, it can lead to angry creditors, upset employees, irate customers or clients, and all of the litigation that can come with that. Ensuring you have a lawyer to assist with the corporate dissolution is essential to avoiding any issues that might arise.

5. A Dissolution Is Not Necessarily the End

Just because you have dissolved your corporation does not mean it is the end of your business ambitions. You may be able to start again with a new venture, possibly with a new business structure that can give you an advantage you did not have before. But to know how you might accomplish this, you should speak to a lawyer with knowledge of business law and commercial practice, who can help you figure out how best to rebuild.