CLOSING A CORPORATION THAT NO LONGER DOES BUSINESS - IS THERE PERSONAL LIABILITY?

One of the primary benefits of doing business in the form of a Nevada corporation or LLC is the protection of its officers, directors and shareholders from personal liability for the acts of the corporation or LLC. Sometimes a corporation ceases to do business and the question becomes, can I just walk away and let the corporation "die?" The answer is yes, but that route is not advisable.

In Nevada, a corporation or other entity that fails to maintain its annual filings and fees with the Nevada Secretary of State will fall into progressively more permanent states of default until, eventually, the entity is "permanently revoked." Often, directors of a corporation or other entity that is no longer doing business, as a result of some business failing, or otherwise, will simply cease maintaining the entity, with the notion that the entity will "die" as it falls into "permanently revoked" status. The flaw in this thinking is that closing a corporation is an act of maintaining corporate formalities, just as conducting regular meetings and maintaining corporate records is when the corporation is actively doing business. Maintaining corporate formalities is the aspect of corporate governance and activity that protects directors from personal liability for the acts of the corporation. It is not surprising then, that a failure to shut down the corporation in the proper way would potentially expose those directors to personal liability for the acts or debts of the corporation after the corporation ceases to do business.
In Nevada, the filing of Articles of Dissolution and the payment of the proper fees to the Secretary of State certify that the corporation is no longer doing business, that it has no further debts, and that all corporate liabilities have been discharged. Proper filings at the end of the corporate life help to protect the directors from becoming "trustees" of the now defunct corporation and personally liable for its prior acts and still outstanding debts.
Global Business Lawyers routinely assists its clients not only in corporate formation and maintenance, but also in the winding down of corporate affairs and proper dissolution of Nevada entities. After conducting business through an entity with the goal of protection from personal liability, it is unwise to ignore the last step in corporate protection - properly winding down the company.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.