As we all know, the business cycle includes ending the business at some point. Even though SBDC helps people start and grow their businesses, we also help people know when and how to end their business. A business can be sold to its employees or an external party or passed to a younger generation. It can also be dissolved. We want to share what the dissolution process is in New Hampshire so you are aware of the steps.
SBDC business advisors are not attorneys, so we asked for some help with this article. Thank you to Kristin Mendoza, Esq. and Katherine Sennott, Esq., attorneys with Abridge Law.
If this is the stage your business is in, connect with your SBDC business advisor for some guidance - and maybe a sounding board.
If the business is a Corporation:
Step 1. The first step in dissolving a Corporation is for the Board of Directors to vote, either through a meeting or written consent, to recommend dissolution to the Shareholders.
Step 2. Once the Board of Directors have voted, with the necessary number of votes, to dissolve the Corporation, the Shareholders must vote, either through a meeting or written consent, to approve the dissolution.
Step 3. At any time after dissolution is authorized, Articles of Dissolution must be filed with the New Hampshire Secretary of State.
Step 4. At any time after dissolution is authorized, a Final Tax Return must be filed with the New Hampshire Department of Revenue Administration.
Optional Notice to Existing Creditors/Vendors. A dissolved Corporation can dispose of known claims from creditors/vendors by providing written notice to all creditors/vendors that it is dissolving, informing creditors/vendors how to present any outstanding bills/claims that they believe are owed, and providing a deadline to submit those final bills/claims. The deadline must be at least 120 days from the date of the notice to the creditors. If a creditor/vendor receiving that notice fails to timely file a claim by the deadline in the notice, then their claim is permanently barred.
Optional Notice to Unknown Claimants. A dissolved Corporation can dispose of unknown claims from creditors/vendors by placing a notice in a newspaper of general circulation (such as the Union Leader) that it is dissolving, informing creditors/vendors how to present any outstanding bill/claims that they believe are owed, and stating that such persons have 3 years from the date of publication to file a claim. If a claimant fails to timely file a claim within that 3-year period, then their claim is permanently barred.
If the business is an LLC:
Step 1. Review the Operating Agreement of the LLC to determine who needs to approve dissolution.
Step 2. Pursuant to the Operating Agreement, approval of dissolution by the Members, Managers, or Both, should be secured. If there is no Operating Agreement, dissolution must be approved by the Members by majority vote.
Step 3. File Certificate of Cancellation with the New Hampshire Secretary of State.
Step 4. File Certificate of Dissolution with the New Hampshire Department of Revenue Administration.
Optional Notice to Existing Creditors/Vendors. A dissolved LLC can dispose of known claims from creditors/vendors by providing written notice to all creditors/vendors that it is dissolving, informing creditors/vendors how to present any outstanding bills/claims that they believe are owed, and providing a deadline to submit those final bills/claims. The deadline must be at least 120 days from the date of the notice to the creditors. If a creditor/vendor receiving that notice fails to timely file a claim by the deadline in the notice, then their claim is permanently barred.
Optional Notice to Unknown Claimants. A dissolved LLC can dispose of unknown claims from creditors/vendors by placing a notice in a newspaper of general circulation (such as the Union Leader) that it is dissolving, informing creditors/vendors how to present any outstanding bill/claims that they believe are owed, and stating that such persons have 3 years from the date of publication to file a claim. If a claimant fails to timely file a claim within that 3-year period, then their claim is permanently barred.
Whether dissolving a Corporation or LLC, it is good corporate governing practice, but not necessary under the New Hampshire statutes, to prepare a written plan of dissolution that summarizes and confirms the above information, including whether the Corporation elected to undertake the optional notices to potential creditors or not.
Under both the New Hampshire Business Corporations Act and the New Hampshire Revised LLC Act, a dissolved entity continues its existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:
- collecting its assets;
- disposing of its properties that will not be distributed in kind to its Shareholders/Members;
- discharging or making provision for discharging its liabilities;
- distributing its remaining property among its Shareholders/Members according to their interests; and
- doing every other act necessary to wind up and liquidate its business and affairs.
This means that the business does not need to wait to close bank accounts, pay all final bills, etc. before filing the Articles of Dissolution or a Certificate of Cancellation. The Articles of Dissolution or Certificate of Cancellation merely provide notice that the business is no longer operating for any purpose other than to wind down whatever business it has previously engaged in. If a dissolved business still needs to pursue accounts, file litigation, pay bills, it can continue to do so as long as those activities are related to the winding down of the business.
Written by:
Kristin Mendoza, Esq. and Katie S. Sennott, Esq.
Abridge Law
www.abridgelaw.com
This is part of a series of articles and resources on business transitions of many types.
Your Business is at a Crossroads - Strategizing the Next Big Step
Employee Stock Ownership Plan (ESOPs) - Introduction
Employee Stock Ownership Plan (ESOP) - What are ESOPs?
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