Do you own a for-profit business and wish to close it? Has your Ohio 501(c)(3) non-profit fulfilled its purpose? If you have recently closed a business, it is important to officially dissolve the entity with the Ohio Secretary of State (SOS). Otherwise, you could be on the hook for future taxes or even continued liability.
So what is involved with dissolution of a corporation? Sometimes the first step is simply that it needs to be reinstated with the SOS. If a charitable corporation hasn’t timely filed its Statement of Continued Existence, or if a for-profit hasn’t timely filed its Biennial Report, then the corporation may have been “Cancelled.” Cancellation should not be confused with a dissolution as they are not the same thing! Once a corporation is reinstated then its owners can proceed to legally dissolve it.
With an active corporation, one should first determine when they would like for the dissolution to occur. This is generally determined by assessing whether all debts have yet been paid and all tax returns filed. In other words, the corporation’s business should be winding down so that by the end of the dissolution period all business activities of the corporation are completed. Non-profit corporations who are tax exempt have additional considerations in winding down their activities in order to dissolve. Most notably that any assets remaining in the non-profit corporation after the payment of all of its expenses (including taxes) must be transferred to another non-profit with tax exempt status in order to prevent the loss of the dissolving corporation’s tax exempt status and the assessment of back taxes and penalties. Since various taxing authorities and agencies must be notified in advance of the dissolution of either for-profit or non-profit corporations, this requires some advance preparation and planning. For example, a Form D5 must be completed (for both non-profit and for-profit corporations) in order to obtain a required tax clearance from the Ohio Department of Taxation. This is a detailed form that should be completed with the help of the corporation’s accountant. Other agencies such as the Ohio Bureau of Workers’ Compensation and the Ohio Department of Job and Family Services will also need to be notified far enough in advance to allow them a sixty (60) day response period for any claims either may have on unpaid taxes before the dissolution is finalized. The timing of these notifications are critical. Once all of these matters have been resolved, the filing of the dissolution can be done with the Ohio Secretary of State in order to obtain a Certificate of Dissolution which will prove that the corporation is “dead.” Completing the process will help ensure that all liability for the corporation is cut off as of the date of dissolution.
Thomas Law Group has helped many for-profit and charitable corporations wrap up their final affairs and properly dissolve their entities. Please contact us for assistance.