This Halloween, Close Zombie Entities Before They Haunt You!

Old, unused business entities (corporations, LLCs, etc.) can cost money and waste time. Shutting them down before year-end is often wise. We can help. Halting activity does not shut down a company. Without dissolution, taxes, filing obligations, and late fees continue to accrue.

An entity is active until formally dissolved. Dissolution begins with filing Articles of Dissolution or a Certificate of Cancellation and requires payment of any final state and federal taxes and the filing of a FINAL tax return. You must also resolve any outstanding debts, payroll, or other liabilities, and notify your registered agent.

By dissolving your inactive business entity, you avoid the minimum franchise tax for the following year. You also limit time spent on administrative obligations, such as multiple hours spent on annual state filings, federal and state tax returns, registered agent maintenance, business license renewals, and other required local permits. It sounds silly, but you are even obligated to complete ongoing record keeping or minutes for your nonprofit even if the board hasn’t met in over a year! By dissolving your entity, you can take these administrative obligations off your team’s plate.

If unnecessary taxes and wasted administrative time are not reason enough to dissolve, failure to manage the entity can lead to penalties and interest, reinstatement fees, tax collection actions, and other liabilities.

Of course, dissolution is not always the right move and must be considered carefully with your attorney. In some cases, dissolving your business entity could remove personal liability protection. For example, you may want to keep a business active if it has outstanding debts or liabilities that it can’t pay back right away or potential future liabilities that are unknown. If you prematurely dissolve the entity these could accrue to you personally.

If you’re unsure whether to dissolve before the New Year, our corporate attorneys can help you determine the safest course of action, tailored to your entity’s unique needs. Don’t let your ‘undead’ company come back to haunt you!

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