
Christopher D. Warren
Partner
212-390-8060 cwarren@sh-law.comFirm Insights
Author: Christopher D. Warren
Date: July 5, 2024
Partner
212-390-8060 cwarren@sh-law.comClosing your business can be a difficult process no matter what the circumstances. After all, you have likely poured significant money, time, and effort into your business. While it may seem more costly and time-consuming, working with an attorney to dissolve your business formally is always a good idea. If a business dissolution is not handled properly, you could face significant liability after you close your doors.
The term “business dissolution” refers to the legal process of closing a business. There are a myriad of reasons why business owners may elect to close their doors, including financial challenges, partnership issues, shareholder disputes, or the desire for different opportunities.
In most cases, you are not legally required to retain a business dissolution attorney. However, given the complexity of the process, it almost always makes sense. Below are just a few of the legal issues that must be addressed:
It is not uncommon for disputes to arise during the business dissolution process, particularly if disagreements between partners, investors, or management prompted the closure in the first place. The most frequent sources of friction include how to divide up assets and liabilities. When dealing with disputes among co-owners, mediation can be an effective conflict management tool. In working with a mediator, owners can often reach a resolution that allows the dissolution process to move forward, saving both time and money.
Breach of contract claims can also result from a business closure. During the dissolution process, a business not only retains the right to expect the performance of their existing contracts, but also remains responsible for performing or paying on those contracts. In many cases, an attorney can help terminate a contract early without legal repercussions; although, it becomes more challenging when dealing with poorly drafted contracts. Other issues, including non-compliance with a contract’s termination provisions and failure to pay early termination penalties, can also lead to potential breach of contract liability.
Disputes over the payment or outstanding taxes can also arise and may subject corporate officers to personal liability. For instance, if dissolution procedures are not completed, and full payment of the outstanding liability is not received, the New Jersey Treasury’s Division of Taxation may pursue a collection action against the corporation and its corporate officers. Under New Jersey law, any officer or director of any corporation who distributes any assets in dissolution or liquidation to the stockholders without having first paid all corporation franchise taxes, fees, penalties and interest can be personally liable for unpaid taxes, fees, penalties and interest.
While the business dissolution process can seem like a hassle, simply walking away will almost always lead to problems down the road. It is imperative to take all the necessary steps to formally close your business and resolve all outstanding liabilities. At Scarinci Hollenbeck LLC, we work with business owners to make the process as seamless as possible, so you can move on to the next phase of your life. Our dedicated business dissolution lawyers have decades of experience serving as trusted advisors to corporations, LLCs, and partnerships of all sizes. From negotiating a dissolution agreement to filing the final paperwork, we can guide you through the process, while also safeguarding your best interests.
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