Corporate Formation, Merger, Dissolution; LLC’s and Partnerships
Corporate Formation of a corporation, LLC, or partnership is governed by the laws of the State where the company is organized. The company must register with the State’s Secretary of State or State Corporation Commission, which establishes the registration procedures by which a company is legally formed. On the other hand, the procedures for a merger and dissolution are typically determined within the company’s governing documents, with the State’s laws only “filling in the gaps” or providing “default” rules if the company’s governing documents are silent in those respects.
Corporate Formation involves the filing the Articles of Incorporation with the State, and the shareholders’ adoption of the corporation’s governing document – the Bylaws. Likewise, a limited liability company, or LLC, is established by filing the Articles of Organization, and the members’ adoption of the Operating Agreement. A partnership is usually the most easily formed business, as it generally only requires the partnership to register only its business name with the State, and the partners then develop a partnership agreement which governs the relations among the partners and between the partners and the partnership.
A merger is when two or more businesses merge pursuant to a plan of a merger into a new business. The plan of merger must generally follow each company’s procedures for the merger as outlined in their respective governing documents and must also abide by the applicable state provisions. A merger is then finalized when the merged company amends its registration with the State, if necessary, to accurately reflect the status of the newly merged company.
Dissolution of a company can occur upon the completion of the procedures outlined in the company’s governing documents, or upon the consent of all the shareholders if the State laws so provide. It is then finalized upon a filing of a notice or certificate with the State. Furthermore, a dissolution can also be ordered by the Court or can occur involuntarily as a result of the company’s failure to pay taxes or re-registration fees with the State.
A company following the proper procedures for formation, merger, and dissolution will safeguard its owners from many possible issues. A lawful formation will provide the owners with limited liability protection, and a properly done merger will help guarantee that the entity and its owners are properly taxed by the State and the IRS so as to avoid any unwanted audits or other tax issues. Finally, a proper and noticed dissolution that is registered with the State can safeguard against future claims against the company or its owners as it can provide notice to potential claimants by giving them a time limit to file such claim.
For more information on Formation Merger and Dissolution, please contact Antonoplos & Associates at 202-803-5676 or schedule a consultation with one of our experienced business attorneys. For general information regarding business law, check out our blog.
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