The development and ownership of a business is one of the most important aspects of a person’s career. A business owner creates a company from inception and dedicates their sweat equity, time and efforts to develop and grow the company, or they invest their own capital to purchase an existing company. In either instance that personal investment is usually one of the most important commitments of that person’s professional life. However, as time passes and change(s) occur, continued ownership and management of the company may no longer be advisable, feasible or desirable. In that event, a business owner does not have to remain captured by the company and forced to continue to participate unnecessarily. New Jersey law provides a remedy through the process of corporate dissolution by which any company may be dissolved, wound-up and thereafter cease to exist. The corporate dissolution process is available to any business entity – a corporation, a limited liability company, a partnership or a sole proprietorship.
A. Reasons for Dissolution of a Business.
As the life cycle of any company continues there may arise, at some point, any one of a myriad of reasons that suggests it is time for the company to be closed, wound-up and terminated. The company may have incurred a downturn or rough economic seas due to loss of customers, personnel or other events that may cause the business to lose all or a greater portion of its revenue stream. Similarly, the individual ownership and management of a company may age to the point of retirement, or even death of key personnel, which negatively affect the ability of the company to continue as an ongoing concern. Also, and not infrequently, significant disagreements and irreparable disputes may arise between members of ownership or management that result in a buyout, disassociation or “business divorce” of ownership. In any and each of these examples, the ultimate effect to the life cycle of the company is usually termination of the business. The corporate dissolution process provides guided steps for the business to be terminated in an orderly and equitable fashion.
B. The Process for Dissolution of a Business.
Under New Jersey law for a corporation, a limited liability company or a partnership, there are statutory provisions that provide guideposts for dissolving a business entity. In general, if dissolution is to be effected through the amicable decision of the owners of the company, a certificate of dissolution, or a written dissolution agreement can be negotiated between the parties as to the particular rights of the various shareholders, members or partner. If dissolution is sought through an adversarial process where the shareholders/ partners can not agree, then the company or any of its shareholders, members or partners may file a court action seeking a judicial decree to order dissolution of the company. The significant benefit of a court action for dissolution is that the Court can supervise and monitor the wind-up process of payments to creditors and distributions to the owners prior to a full dissolution decree.
Whether negotiated amicably amongst ownership, or forced to be dissolved by court action, the “wind-up” process will include collecting all of the assets of the company, identification and payment of all existing debts to creditors, and then liquidation and distribution of any remaining assets or revenue recovered. The balance of assets is to be distributed among the shareholders, members or partners in accordance with the recorded percentage ownerships of the company.
C. The Availability of the Dissolution Remedy to Any Business Owner
Any person who may be a dissatisfied owner, or simply wants to leave their business and yet is unable to negotiate an amicable exit strategy need not have to continue their participation in the ownership or management of their company unnecessarily. The remedy of corporate dissolution remains available as a viable means to terminate any company through the wind-up process to achieve a fair, timely and orderly cessation of the business operations and thereby conclude the rights, duties and obligations of the company’s owners.
If you want or need to discuss dissolution of your company with legal counsel, Timothy D. Lyons, Esq, is the Co- Chair of the Business Litigation Department of Jardim, Meisner and Susser. Mr. Lyons represents and counsels business owners through all phases of a company’s life cycle, including actions for dissolution of any corporate entity. Mr. Lyons can be contacted at (732) 978-1919 and firstname.lastname@example.org