There are several reasons for dissolving a corporation. It could be due to bankruptcy, an internal dispute, among other reasons.
Suppose you are a business owner and decide to cease your business’s operation. In that case, there are many things that you have to do before your corporation is officially out of business. You don’t just simply stop and then disappear.
With that said, here are the things you should know when dissolving a corporation in Maryland.
What It Means to Dissolve a Maryland Corporation
There are some steps a business owner must follow to dissolve his corporation. There may be a few differences between the processes in different states, but most of the steps are similar. Despite the variations of the steps in other states, you must follow the steps below.
- The first step in dissolving a corporation is to hold a board meeting with all the board members present. They all must be aware of the initiative to dissolve the corporation.
Despite the initiative, there must still be a resolution in which most of the board members approve to dissolve the corporation. The shareholders may also need to take part in the voting, but that depends on your organization’s structure. This process must be thoroughly recorded and then stored in the corporate record.
- After this, proceed to the office of the Maryland Secretary of State to file the Articles of Dissolution.
- Next, you have to complete all of the IRS tax requirements with the State of Maryland by proceeding to the State Department of Assessment and Taxation (SDAT) to ensure that you have no fee left unpaid. This must be done at least 20 days before you even file the Articles of Dissolution.
- After this, all your business licenses and permits must be canceled, and all your business bank accounts must be closed.
- Lastly, concerning your employees, vendors, customers, and everyone who has a connection to the company, notify them of the initiative to dissolve the company.
These steps are easy enough to understand, and you should have no trouble going through with each of them. The only step in this process, which causes the most confusion and is the most complex, is the Articles of Dissolution which will be discussed further in the section below.
Dissolving a Maryland Corporation by the Board of Directors
As discussed above, the first step of dissolving a corporation is by holding a meeting and informing all board members of the plan to dissolve the company.
For those corporations in the state of Maryland that have initiated business and have already issued shares, they need to file for the Articles of Dissolution from the Maryland Secretary of State. You can choose to come up with your own Articles of Dissolution by designing one for yourself as it’s not a must to use files provided by the Maryland Secretary of State.
When filling up this form, you will need to put in some information for the Articles of Dissolution. This includes the following:
- the name of your corporation
- the names, addresses, and the positions held by the corporate officers
- the date of the authorization of the dissolution
- the addresses and names of the corporate directors
- the date to which the dissolution was filed
- the date to which the dissolution will be effective
- the signature of the representative authorized by the company.
If you file for the Articles of Dissolution in the state of Maryland, you’ll have to write a check of 100 dollars that is payable to the Maryland “State Department of Assessments and Taxation” You can choose to expedite the process by paying an additional 50 dollars. You can file the documents in-person or mail the articles of dissolution to the address:
State Department of Assessments and Taxation
301 W. Preston Street; 8th Floor
Baltimore, MD 21201-2395
It should take the Maryland Secretary of State 8 to 10 weeks to process the dissolution of your business after your documents have been received if you file by mail, but it generally takes the expedited mail about a week. However, the process will be completed on the same day if you file in-person and pay for the expedited service.
Dissolving a Maryland Corporation by the Incorporators
There are instances wherein a corporation is dissolved before issuing the shares or before any business transaction has ensued. In these cases, it is the incorporator’s responsibility to spearhead the initiative of dissolving the corporation.
For all those corporations in the State of Maryland that have not yet issued shares or had any business transaction, you need to file for the Articles of Dissolution as explained above. However, you’ll have to include a statement that shows that your corporation is either dissolving prior to an organizational meeting or after an organizational meeting but before the issuance of stock. The submission is the same as explained above.
Dissolving a Corporation in Maryland: Other Things You Should Know
You will lose the claim to your business name if your corporation is dissolved after filing for voluntary dissolution. However, you can decide to cancel the dissolution before the SDAT approves your application and continue your business with the same name. Hence, to make things more straightforward in the long run, it’s best to verify everything before filing your dissolution.
There are some instances wherein the Maryland state will be the one to initiate dissolution. This is known as administrative dissolution or involuntary dissolution.
This can happen if a corporation or a company refuses or fails to submit its annual reports by the deadline. If you are subjected to involuntary dissolution, you have the option to reinstate your business by submitting the annual reports you failed to submit, pay a fine of 300 dollars for each report, and then proceed to the SDAT to an Article of Revival.
Whether you plan on dissolving your corporation, which has already issued shares and has started making business transactions, or a corporation that hasn’t commenced business yet, the process remains the same in the state of Maryland.
The only significant difference is in the form that you need to file. Hopefully, this article has been a great help to you in dissolving your corporation in the State of Maryland.