Dissolving a business entity in Texas is described in the Texas Business Organizations code. It is not a difficult process, although it does take some time.
The first step is to have a formal meeting with the members of the LLC or the shareholders of the corporation. A vote must occur, and since this is considered a “fundamental action,” at least 2/3 of the members or shareholders must vote in favor of the dissolution. Once the vote occurs, regular business operations can cease. It’s a good idea to prepare an inventory of all assets that exist as of that date. Assets will include everything such as office furniture, computers, inventory, even supplies. A list of all known or potential creditors must be compiled. Those people or entities are entitled to advance written notice of your intent to dissolve the business. It is recommended that such notice be mailed via certified mail, so you have proof it was sent.
The notice of intent to dissolve gives each creditor a deadline by which they must submit any claims. Between the sending of the notice letter and the deadline, the assets must be liquidated. It is best to try to get as close to the fair market value as possible. Any money obtained from the sale of assets needs to be set aside and not spent.
Once the deadline for submitting claims passes, the money from the liquidated assets is distributed to those creditors who submitted claims. If there is not enough money to cover all the claims, the claims are paid on a pro-rata basis. Once the money is distributed to creditors, then a certificate of dissolution can be filed with the secretary of state. This requires a certificate of good standing from the State Comptrollers office, stating that all state taxes are current. There is a two year statute of limitations on suing a dissolved business entity.
So if your business is insolvent, it is best to get it dissolved sooner rather than later. Call Bailey and Galyen’s Business Law team for assistance in dissolving your business. Packages are available to receive a discount on personal bankruptcy in addition to the dissolution of your business.