At Holland Law Group, PLLC, we put our years of Arizona business law experience to work for you to make dissolving your business as quick, painless, and profitable as possible.
Dissolving a Partnership
Before you take steps to dissolve your partnership—general, limited, or limited liability—get state and federal income tax advice, and make sure you fully understand the financial ramifications of shutting down your business. If you are a partner in a general partnership, or are the general partner in a limited partnership, you may be responsible for some of the partnership's debts even after dissolution. On the other hand, if your business still has assets after you have paid off all creditors, the government will view any dividends of the dissolution as income and tax them as such.
Next, get an agreement to dissolve or terminate the partnership in writing, if you are a partner in a multi-member partnership. The written dissolution agreement should include details about payment of final expenses, the timing of the assignment of assets, who gets what assets, when the partnership will cease activity, and when the partnership will notify the Arizona Corporation Commission.
Finally, pay off all creditors with remaining partnership assets before you file Articles of Dissolution with the Arizona Corporation Commission. Arizona law does not permit partnership members to make further payments to themselves without first satisfying all creditors' claims when dissolving a partnership.
Dissolving a Corporation
If your corporation has not issued shares or commenced business, the majority of initial directors or incorporators may simply dissolve the corporation by filing Articles of Dissolution with the Arizona Corporation Commission. If the corporation has already commenced business, Arizona corporate dissolution becomes more complex.
Once shares are issued, the board of directors may propose dissolution to the shareholders. The board must notify each shareholder—regardless of voting rights—of the proposal and the shareholders meeting which will vote on the issue. Unless the articles of incorporation or the board of directors require otherwise, a majority vote for dissolution is sufficient for the board to proceed with dissolves the corporation. Articles of Dissolution must be published, and all fines and fees paid, before the
Arizona Corporation Commission will consider the corporation dissolved. Dissolved corporations do not cease to exist, but continue to function only to the extent necessary to “wind up” its business. This includes collecting outstanding debts, paying off creditors, disposing of properties that will not or cannot be distributed to the shareholders, and distributing remaining assets to the shareholders according to their interests.
Dissolution can be as easy as signing forms (if all the owners do it) or as difficult as a contested divorce. If “partnership” dispute arises, early legal counsel is important. Unilateral dissolution or removal of one member by another is not legally effective and may give rise to legal claims.