You may have formed a corporation to transact business in Texas, only to realize later that it's not what you want. Similarly, you might have formed a corporation with a group of friends, but later realized that you can't work together. In any event, dissolving a Texas corporation will require you to complete several very important steps.
Dissolving a corporation means to officially end its existence. Dissolving a corporation also places the corporation and its shareholders beyond the reach of any debts and liabilities that remain after its dissolution.
The dissolution of a corporation in Texas is governed by the state's Business Corporation Act, as well as, various sections of the Texas Business Organizations Code (BOC), which governs all other Texas business entities as well.
Also, your corporation's Certificate of Formation or corporate Bylaws may specify certain requirements that must be met and/or procedures that must be followed to dissolve the corporation. Make sure that you follow any such requirements or procedures and officially document them in writing or in the official minutes of the related meeting.
To dissolve a corporation formed in Texas, you must complete several tasks, collectively referred to as "winding up" the corporation.
While Texas corporations may be dissolved involuntarily by court order or by the Texas Secretary of State (due to failure to comply with corporate formalities and maintenance requirements, for example), this article deals exclusively with the voluntary dissolution of a Texas corporation by its Board of Directors or shareholders.
In most cases, the dissolution of a corporation in Texas will commence with either:
In the first instance, your corporation's Board of Directors will resolve to dissolve the corporation and then request that the corporation's shareholders vote on the matter.
The shareholders must be given advance notice of at least 10 days. Then, unless otherwise specified in your corporation's Certificate of Formation or Bylaws, the resolution must pass by a majority vote of at least two-thirds of the corporation's voting shareholders.
In the second instance, all of the corporation's shareholders must sign a document consenting to the dissolution of the corporation. Afterward, the consent should be properly recorded in the corporation's records.
For small corporations, initiating the dissolution process by consent is often the easiest way to go. This is because the shareholders of a small corporation are often its directors as well. Thus, it is easier to obtain unanimous consent.
In many ways, dissolving a Texas Corporation is fairly straightforward. Technically, it is as simple as filing a Certificate of Termination with the Secretary of State along with a filing fee of $40.
But, before you can file a Certificate of Termination with the Secretary of State, you must "wind up" your corporation. Winding up your Corporation will require your corporation to cease all business activities, except for those necessary for winding up and complying with BOC requirements, including:
Once you have completed the "winding up" stage of Corporation dissolution in Texas, you will then need to obtain a Certificate of Account Status. This document, which can be obtained from the Texas Comptroller of Public Accounts by filing Comptroller's Form 05-359, verifies that you have satisfied all of your Corporation's taxes and corporate obligations and that the corporation is in good standing with the state.
The Certificate of Account Status will be needed to officially terminate your Corporation by filing a Certificate of Termination (Form 651) with the Secretary of State. The Certificate of Account Status must be attached to the Certificate of Termination, which must specify, among other things:
Whenever you wish to dissolve a registered business entity, such as a corporation, it is important to avoid unnecessary costs, liability, and conflict by enlisting the assistance of a qualified and experienced attorney. For help with dissolving a Texas Corporation, contact our law firm to arrange a free consultation with a knowledgeable and experienced Texas business law attorney.