What Happens To A Shareholders In A Dissolved Company?

Dissolved corporations cease to (legally and/or properly) exist, and what effect it will have on the shareholders is dependent on how the corporation became dissolved.

This is one of my many judgment articles: I'm a Judgment referral expert, not an attorney. This article is only my opinion based on my long term experiences within California, please hire an attorney when you require legal advice.

Bypassing bad financial results to the the company shareholders, depends mostly on quick and proper corporate dissolution, that may be accomplished using either involuntary, voluntary, or a suspension process.

A voluntary Dissolution could be the case if the company is no longer serving its purposes. When the company gets voluntarily dissolved and their remaining assets get distributed to all shareholders, and does not pay off all its company debts, shareholders may be responsible for the debts. When it should happen, the shareholders should think about voluntarily and quickly dissolve the company, to save money. It will require 3 steps:

1) Filing with the state, the correct documents.

2) Winding down the business's operations. A very important prerequisite to closing the business operations is by paying all the remaining claims and debts, and taxes and fees due to all.

3) Selling off any corporate assets that are left and giving the assets, if applicable, to all shareholders. A voluntary corporate dissolution, it might have a bad financial effect on all shareholders, particularly when the company's operations aren't completely shut down.

Most state laws usually allow a period of time after a company dissolution, so that creditors can sue shareholders because of not paying the company debt or wrongfully transferring company assets. As an example, California has a 4-year time limits for these kind of claims, and Delaware has a 3-year time limits.

Usually, a shareholder's responsibility for all debts of a company is only the amount the company already distributed previously to them. But, payroll and tax debts may result in the shareholder owing more money, particularly when the shareholder was formerly a director or an officer in the company.

Involuntary Dissolution happens if a company gets a court order instructing them to dissolve, when a least one of the company's shareholders files a lawsuit at court asking for a dissolution. One example of the way that circumstance might happen is when the communication between the shareholders is unreasonable and interferes with the company business.

Involuntary dissolutions could become negative financially for all shareholders. Besides paying court costs and legal fees for everything including the suit, liquifying the company's assets with a court-endorsed auction will usually mean that the assets that are left to get auctioned off for a sharp discount.

When the company gets involuntarily dissolved either administratively by the state, or by the court, the shareholders might still pay more expenses and liabilities.

Within certain states, a company may become administratively dissolved when it does not fulfill with all state tax or filing obligations. As an example, the majority of states can dissolve a company when the company does not complete their yearly report. This kind of dissolution means the company stops existing, sometimes with no shareholders' knowing.

With an administratively dissolved company, financially negative results can happen, including all shareholders might become responsible for any liabilities and debts from the continuing operations of the company's business.

The internal revenue service considers dissolutions as being an asset distribution to shareholders; even when those assets aren't liquid, and it doesn't matter that the shareholders didn't want to dissolve the company and make the distribution. It may create tax problems shareholders.

When a company gets suspended, somebody, maybe shareholders, will then need to properly close the company. Shareholders might have additional liabilities when they do not take all actions required for dissolving the company, to bypass paying fees to the state and future annual filing fees.

Within certain jurisdictions, for example, California, don't administratively dissolve companies because of not making payments and filings, the company gets suspended, but remains in existence.

Within California, a suspended company remains in existence and needs to maintain their annual responsibilities, that will keep accruing with interest and penalties every year before dissolution articles get filed. Shareholders won't be permitted file any corporate articles unless the prior fees, penalties, and/or interest charges are paid.

Mark Shapiro - Judgment Broker - http://www.JudgmentReferral.com - where Judgments go and are quickly Collected! Bypassing bad financial results to the the company shareholders, depends mostly on quick and proper corporate dissolution, that may be accomplished using either involuntary, voluntary, or a suspension process.

This article was published on 31 Aug 2014 and has been viewed 555 times
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