JESSON||RAINS ATTORNEYS AT LAW
  • Home
  • Practice Areas
    • Wills and Trusts
    • Business Law & Litigation
    • Construction Contracts and Litigation
  • Team
    • Edward Jesson - Attorney
    • Kelly Rains Jesson - Attorney
    • Danielle Nodar - Associate Attorney
    • Sue Lambert - Office Manager
    • ​Ashley Deese ​- Paralegal
    • Shayla Martin - Legal Assistant
  • News & Blog
    • COVID-19 Resources
  • Contact
  • Testimonials
  • Free Resources
    • Business Resources
    • Estate Planning Resources
    • Probate Resources
📞 704-444-0594

Blog

Closing A Business: What is Involved?

4/10/2020

4 Comments

 
Picture
By Attorney Edward Jesson
​

Whether good or bad, it is sometimes necessary to dissolve a corporation or limited liability company (“LLC”). If the business has no assets or liabilities, then closing down is relatively simple. However, business owners can get into trouble when they attempt to close down their businesses if it has remaining assets and liabilities. It is recommended that they work with an attorney. There are some subtle differences between dissolving an LLC and a corporation, but we are just going to use a corporation as an example below.

The first step in voluntarily closing a business in North Carolina is to file the articles of dissolution with the Secretary of State. Once the articles of dissolution are filed, the corporation still must adhere to its bylaws with regards to its directors and shareholders. However, the corporation is no longer allowed to carry on its normal business and must only do things in furtherance of winding up its affairs and liquidating. The North Carolina Business Corporation Act specifically states that a business may:
  • Collect its assets;
  • Dispose of property not to be distributed to shareholders;
  • Discharge its liabilities;
  • Distribute the remaining property to shareholders; and,
  • Do any other act necessary to wind up and liquidate.
Any act further than those necessary to wind up and liquidate may invalidate the dissolution, which could have potential liability ramifications at a later date.

The next step in the process is liquidation. During this process, the owners of the business are responsible for selling assets and for settling the corporation’s debts. In the North Carolina Business Corporations Act, there are notice and publication procedures that a corporation can use to give notice of its dissolution or liquidation to creditors or potential creditors. While the Act does not impose any legal requirement to do so, it is beneficial for businesses to follow this procedure because it starts a clock and establishes deadlines within which creditors must bring claims.
​
The potential claims against a corporation fall into two main camps: known claims and unknown claims. If a corporation sends written notice of its dissolution to known creditors, it can establish a claims due date of 120 days from the date of the notice. If the claim is not made by that deadline, the claim will be considered time barred. For unknown claims, a corporation must publish, among other things, notice of its dissolution in a newspaper in the county where the dissolved corporation has its principal office. This will start a five-year clock for unknown claims.

Generally, when liquidating a corporation, all assets of the corporation will be distributed to any creditors first and then to the shareholders. If the assets are not properly distributed (e.g. if a shareholder received assets instead of a creditor), then the aggrieved creditor could potentially file a lawsuit against the shareholder and against the directors who authorized the distribution.

As you can see, closing down a business can be a minefield for all involved. The attorneys at Jesson & Rains can help you close down your corporation or LLC properly or help you figure out alternatives to closing down your business.
4 Comments
Victoria Addington link
7/20/2022 01:10:19 am

Thank you for explaining that the aggrieved creditor can file a lawsuit if the assets are not distributed properly. My friend told me that their company is facing a lawsuit. I should advise him to hire a business litigation attorney to help them protect the business.

Reply
Kelly Jesson
12/7/2022 10:36:53 am

Thank you for your comment Victoria. If your friend is located in North Carolina, they can reach out to us for assistance at 704-444-0594.

Reply
Millie Hue link
12/1/2022 08:38:24 am

It's interesting to know that liquidation would be distributing assets of a corporation to any creditors then shareholders, thereafter. I can imagine how to shop liquidation items would actually have to be distributed in a hierarchy. In that case, it would probably be better to have a professional in this industry to help you with the processes. With their expertise, you are sure that there will be no delay or issues when you are about to close your company.

Reply
Kelly Jesson
12/7/2022 10:39:34 am

Thank you for your comment Millie.

Reply

Your comment will be posted after it is approved.


Leave a Reply.

    Subscribe to our newsletter.

    Subscribe

    Author

    Kelly Rains Jesson
    ​Edward A. Jesson

    Categories

    All
    529 Plans
    ADR
    Alternative Dispute Resolution
    Amendments
    Asset Protection
    Asset Purchase
    Assumed Business Name
    B-Corps
    Blockchain
    Business
    Business Formation
    Business Litigation
    Business Purchase
    Business Scam
    Buy/sell
    Civil Procedure
    Collections
    Community
    Construction
    Contracts
    Copyrights
    Corporations
    COVID 19
    Cryptocurrency
    Data Privacy
    DBA
    Default
    Dissolution
    Elder Law
    Employment
    Estate Planning
    Ethics
    Eviction
    Firearms
    Firearm Trusts
    FLSA
    Guardianship
    Health Care Directive
    Holding Company
    Intellectual Property
    Landlord-Tenant
    Liens
    Litigation
    Living Will
    LLC
    News
    No Surprises Act
    Operating Agreement
    Partnership
    Patents
    Power Of Attorney
    Probate
    Real Property
    Retirement
    Secretary Of State
    Small Business
    Trademarks
    Trade Secrets
    Transactional
    Trusts
    Wills

    RSS Feed

    View my profile on LinkedIn

      Contact us.

    Submit

    Archives

    March 2023
    February 2023
    January 2023
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    March 2016
    January 2016
    December 2015
    November 2015
    October 2015

Picture
Jesson & Rains, PLLC
5821 Fairview Road #218
Charlotte, NC 28209
(704) 444-0594
information@jessonrainslaw.com

By appointment only.

SERVICES

Wills & Trusts Probate
Business Law & Litigation
Construction Contracts & Litigation


Our Attorneys
Location

SUPPORT

Contact
Disclaimer
©Jesson & Rains, PLLC  ALL RIGHTS RESERVED.
  • Home
  • Practice Areas
    • Wills and Trusts
    • Business Law & Litigation
    • Construction Contracts and Litigation
  • Team
    • Edward Jesson - Attorney
    • Kelly Rains Jesson - Attorney
    • Danielle Nodar - Associate Attorney
    • Sue Lambert - Office Manager
    • ​Ashley Deese ​- Paralegal
    • Shayla Martin - Legal Assistant
  • News & Blog
    • COVID-19 Resources
  • Contact
  • Testimonials
  • Free Resources
    • Business Resources
    • Estate Planning Resources
    • Probate Resources