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How Your Corporation Can Be Dissolved Against Your Will

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In some cases, several directors can find themselves in intense battles over how to run the corporation. This may lead to the dispute finding its way to court. If you are unable to figure out how to come to a negotiated resolution, the corporate dissolution statute can be used to dissolve the corporation over the objections that one or more directors have brought to the court. If you are a director, you may need guidance from a corporate law firm.

Lesser Remedies

The courts will typically not dissolve a corporation except at last resort. Instead, they will encourage lesser remedies such as a buyout. Then, the courts must determine that the management is deadlocked in the management of corporate affairs. The court will discuss with each party whether the dissolution is appropriate.

They will be considering the degree to which the corporation is paralyzed and also the degree of distrust and hostility between the directors. The courts choose a dissolution when the directors are unable to escape the deadlock, and there may be irreparable damage done to the corporation as a result.

How a Corporation is Dissolved

A corporation continues to exist regardless of whether it is engaged in business operations until it has been dissolved. Until the corporation has been dissolved formally, the directors of the business are expected to meet all legal requirements. A certificate of dissolution must be filed with the Secretary of State, usually through the Incorporation Bureau. 

Once the corporation has been dissolved, the IRS must be notified. All taxes that are due must be paid before the corporation can be dissolved. The state and local tax documents need to be marked as "final returns." 

All forms of credit associated with your corporation need to be closed. This includes all bank accounts, credit cards, licenses, and permits. Then, all of your customers and vendors must be informed that your corporation is dissolving. Because your corporation might be in the process of being dissolved against your will, you'll need to consult with both the courts and a corporate attorney on what obligations you must fulfill. Your main concern will be limiting your liability against government fees and lawsuits.

Preventing Dissolution

A corporate lawyer can help you divide a remedy that can allow you to avoid a corporate dissolution. For example, a corporate lawyer may help you negotiate a buy-sell agreement to separate both parties. For more information, contact a local corporate law firm.


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