M&As: Why You Shouldn’t Dissolve the Company Right After Selling

You’ve sold or merged your business, and the transaction has concluded. The next step is corporate dissolution, right? Actually, no. There are a few very good reasons why you shouldn’t dissolve your company immediately after selling it.

There is a lot of conflicting advice out there about how to handle wrapping up a business after its sale and on the timing of when the business should fully dissolve. The thought that the company can be dissolved upon completion of the deal is a logical one but there is a stage in between. This stage is referred to as the winding down stage.

Many business owners are unaware of the many issues that can arise in between the sale of the business and the dissolution of a company. These issues can include employment claims, third party lawsuits, tax claims, and a variety of other claims that can pop up after a company stops operating. Leaving the corporation intact and registered is the safest way to protect the owners from any potential liabilities that might pop up post-sale. The minimal costs in registration maintenance are small compared to the potential damages that could be awarded, as well as the hassle of dealing with unknown or residual claims.

The best practice is to check with your state’s statute of limitations on how long claims can be filed, and then fully dissolve the company after that time has passed (likely two to three years in most cases). 

It’s important to seek the advice of an experienced corporate attorney to ensure that you are protected after transitioning out of your business and deciding when corporate dissolution is best. Hackstaff, Snow, Atkinson & Griess is well-versed in corporate transactional law and has the expertise to create the best strategy for transitioning your business. Contact us today for a free consultation.