Dissolution of a Business In Maryland
Frequently, business owners decide that they want to close their operation. The most likely causes for this are the sale of all of the assets of the business, or diminished operational income. Regardless, the first step in closing a business is to review the operational documents that govern the business.
Those documents, whether as Bylaws or an Operating Agreement, should give some input as to the “winding down” of the business. Things to consider at this point are the creditors of the business, reducing staff, completing contracts obligated by the business, and ensuring that as many receivables as possible are paid.
Contracts obligated to be paid by the business could have a personal guarantee, so it is beneficial to have those contracts fully complied with before closing operations. The business owner(s) will want to reduce staff in a logical way, to reduce operating expenses moving toward closure.
The business owner(s) will want to get payment on as many receivables as possible, as it will be virtually impossible to obtain payment on those receivables after the business closes, unless some other person or business purchases or otherwise assumes those obligations.
Finally, the payment of creditors must take place. That obligation is set out in the statutes that Maryland enacted to control the final closure of the business, which includes a certification that either all creditors were given at least 30 days’ written notice, or that there are no creditors of the business.
Once those obligations are fulfilled, the business owner(s) files the appropriate documentation with the State of Maryland, thereby losing rights to the name of the business and the legal protections that go with business ownership, prospectively from the date of filing the Notice of Dissolution. Importantly, the business must still file a Federal and State tax return for the year in which the business is closed.
If you need help in closing your business, please call the attorneys at Spencer & Stahl, who can help you through this process.
Post written by Chad Spencer