Legal Steps to Close a Corporation in Minnesota
Closing a corporation in Minnesota involves several legal steps that must be followed to ensure compliance with state laws. Properly closing a corporation, also known as dissolution, helps protect the owners from future liabilities and ensures that all financial obligations are settled.
1. Board of Directors Resolution
The first step in dissolving a corporation in Minnesota is to hold a meeting of the board of directors. A resolution must be adopted to approve the dissolution of the corporation. The resolution should clearly state the intent to dissolve and the reasons for doing so.
2. Shareholder Approval
After the board of directors approves the dissolution, the next step is to seek approval from the shareholders. Minnesota law requires that at least two-thirds of the shareholders must vote in favor of the dissolution at a formal meeting or through a written consent.
3. File Articles of Dissolution
Once the corporate board and shareholders have approved the dissolution, the corporation must file Articles of Dissolution with the Minnesota Secretary of State. This document formally notifies the state of the corporation's decision to dissolve. You can file online or by mail, but make sure to include all required information and pay the necessary filing fee.
4. Notify Creditors and Settle Obligations
After filing the Articles of Dissolution, the corporation must notify its creditors of the dissolution. This allows creditors to submit any claims against the corporation. It is crucial to settle any debts, obligations, and claims before fully dissolving the corporation to avoid personal liability for corporate debts.
5. Liquidate Assets
Before the corporation can be officially dissolved, any remaining assets must be liquidated. This involves selling the corporation's assets and paying off any existing debts. Any remaining assets can be distributed to the shareholders after all liabilities have been settled.
6. Tax Clearance
In Minnesota, it is necessary to obtain a tax clearance certificate from the Minnesota Department of Revenue. This certificate verifies that the corporation has satisfied all tax obligations. Failure to address tax liabilities could lead to personal liability for the corporation’s officers and directors.
7. Final Tax Returns
The corporation must file its final federal and state tax returns. Ensure that any business taxes, including sales and employment taxes, are properly reported and paid. State tax filings should indicate that they are the final returns, clearly noting that the corporation is in the process of dissolving.
8. Retain Records
Even after the corporation is dissolved, certain records must be retained for a specified duration, typically for three to seven years, depending on the nature of the documents. This includes financial statements, tax returns, and records related to the dissolution process.
9. Inform Stakeholders
Don't forget to inform stakeholders, employees, and clients about the closure of the business. A formal announcement, either written or Verbal, may be necessary to wrap up any final dealings and maintain professional relationships.
By following these legal steps, you can ensure a smooth and compliant process for closing a corporation in Minnesota. Proper handling of the dissolution will prevent potential legal issues and protect the rights of the corporation's owners and shareholders.