Are you ready to stop doing business with your Tennessee corporation, but you’re not sure how the official dissolution process works?
The state of Tennessee requires corporations to file documentation of a dissolution, which can differ depending on a couple of key factors. What are these factors, and what does the dissolution process include? In this guide to dissolving a Tennessee corporation, we’ll break down all the relevant details.
If at any point you need help, you can use a service like Incfile or Northwest Registered Agent to handle the process for you.
Guru Tip: Most company formation services are also able to dissolve your entity for a small fee. They’ll take care of the paperwork so you can move on. Two popular options are LegalZoom and Incfile.
What Does It Mean to Dissolve a Corporation?
In any state, there is a series of steps that needs to be followed in order to properly dissolve a corporation. While this process does vary some from state to state, for the most part it’s necessary to follow this basic plan (unless your corporation has not yet issued shares or started doing business, which we’ll get to shortly):
- Hold a board of directors meeting and formally move to dissolve your corporation. The resolution to dissolve must be agreed upon by a majority of the corporation’s directors. Depending on your corporation’s structure, you may then need to take the vote to your shareholders. Either way, it’s important to take detailed records of this process for your corporate record.
- Fill out and file the appropriate dissolution documents with the Tennessee Secretary of State.
- Fulfill all tax obligations with the state of Tennessee, as well as with the IRS.
- Cancel any relevant licenses and permits, along with closing your business bank account.
- Notify customers, vendors, and creditors of your dissolution.
Most of these steps are fairly self-explanatory, but where many corporation owners run into some confusion is when it comes to the Articles of Dissolution. In Tennessee, this is even more complicated as there are a few different varieties of this form. With that in mind, let’s dive into the details of this step.
How to Dissolve a Tennessee Corporation by the Board of Directors
Most corporations must be dissolved by the board of directors, and we discussed the necessity of holding a meeting to reach this resolution in the previous section.
In the state of Tennessee, if you’ve issued shares, then dissolving your corporation will be a multi-step process. Tennessee requires you to first dissolve your corporation and then terminate it. You can do both steps separately, or if you’ve finished conducting business, you can complete both at once. However, your termination cannot precede the dissolution. First, let’s cover the steps to dissolve the corporation.
1) Complete your dissolution by the shareholders
First, you must file the Written Consent to Dissolution. There is no filing fee for this document, but it serves as a written affirmation that your shareholders have agreed to dissolve the corporation.
Your Articles of Dissolution can accompany this document. This second document is more complicated, as it requests the following information:
- Name of your corporation
- Date the dissolution was authorized
- Affirmation that the resolution was adopted by the shareholders
- Effective date of the dissolution (if different from the filing date)
- Name, signature, and capacity of the individual filing the form
2) Terminate the corporation
After the dissolution process is complete, you can take as much time as you need to wind up your business affairs. However, the dissolution does not mean your business no longer exists. Filing the termination documents will do so. Like the dissolution process, you’ll need to include a Written Consent to Termination, and then file the Articles of Termination of Corporate Existence. The Articles request the following information:
- Name of the corporation
- Affirmation that all assets have been distributed to the investors or shareholders
- Confirmation that your dissolution has not been revoked
- Name, signature, and capacity of the individual filing the form
There is a $20 filing fee for both the Articles of Dissolution and the Articles of Termination, so you’ll pay $40 total. Whether you pay both at once or installments, you should make your check payable to “Tennessee Secretary of State.” Then, mail your form to the following address:
Tennessee Department of State
Corporate Filings
312 Rosa L. Parks Avenue
6th Floor, William R. Snodgrass Tower
Nashville, TN 37243
Under typical circumstances, you can expect the state of Tennessee to process your dissolution filing within three to five business days.
How to Dissolve a Tennessee Corporation by the Incorporators
Sometimes, entrepreneurs need to dissolve their corporation before shares are issued or any business is transacted. In this situation, the incorporator will need to take responsibility for dissolving the corporation.
The process to dissolve a Tennessee corporation that has not yet issued shares is much simpler than a corporation with shares. You’ll need to file just one form, the Articles of Dissolution and Termination by Incorporators or Initial Directors. This form both dissolves and terminates your corporation since you won’t have any affairs to wind up.
The form also requires less specific info than the above step, as it only includes the following:
- Name of your Tennessee corporation
- Date of incorporation
- Indication that your corporation either has not issued shares or conducted business
- Confirmation that no debts remain unpaid
- What party approved the dissolution
- Date the dissolution was authorized
- Name, signature, and capacity of the individual filing the form
The filing fee for this is $20. You can make your check payable to “Tennessee Secretary of State,” and then mail it to the same address:
Tennessee Department of State
Corporate Filings
312 Rosa L. Parks Avenue
6th Floor, William R. Snodgrass Tower
Nashville, TN 37243
Finally, the Articles of Dissolution and Termination has the same three to five business day turnaround.
What Else Do I Need to Know About Dissolving a Corporation in Tennessee?
The moment you finish filing your Articles of Termination, your business name is up for grabs. Any other business that wants your name can use it. This is one of the reasons that you should never dissolve a corporation until you’re absolutely certain that you will no longer conduct business in this state.
There’s also the issue of administrative dissolutions to discuss. This is when the state dissolves your corporation without you requesting that they do so. This can happen if you fail to file your annual report on time. If your form is late, the Secretary of State will send you a notice. You have 60 days after receiving that notice to correct the delinquent forms. The state will dissolve your corporation if you still have not filed the form at that point.
It is possible to reinstate a dissolved corporation (as long as you have not filed the Articles of Termination). You’d need to file the Application for Reinstatement Following Administrative Dissolution. However, there is a $100 fee to get reinstated. In addition, you’ll need to pay any fees for the annual reports you missed. All told, the administrative dissolution and reinstatement process can be a burden for a corporation, and it’s best to avoid this situation altogether.
Conclusion
The process to dissolve a Tennessee corporation that has not distributed shares or transacted business is very simple. If your corporation has issued shares, it is much more time-consuming.
Either way, it’s crucial that you complete each step discussed in this guide accurately, because you certainly don’t want to run into any issues with the dissolution process.
We hope this guide helped you answer any questions you might have had about dissolving a Tennessee corporation!