19 Mar Oregon Corporation Dissolution
Oregon Corporation Dissolution
All corporations have a lifecycle, from launch through operations through an eventual transition, which could take the form of a buy-out, merger, acquisition or simply a closing down and dissolution. It is inevitable that there must be a corporate transition at some point, since owners change, markets change and opportunities come and go. For businesses that have run their course and are ready to close, it is critical that the proper steps be followed in closing down and voluntarily dissolving. This article sets forth the steps for properly closing down and dissolving an Oregon corporation.
Step 1: The Corporate Resolution
The first step in dissolution is drafting the proper corporate resolution. This may be done in one of three ways:
1) By the incorporators or initial directors (ORS 60.621):
This method may be used only if the corporation has not issued shares and has not commenced business. The initial director(s) draft a consent resolution to dissolve the corporation.
2) By consent of the shareholders (ORS 60.624):
This method may be used if shares have been issued. All of the shareholders should enter into a written consent to dissolve the corporation.
3) By the board of directors and shareholders (ORS 60.627):
Last, under this method, the corporation’s board may propose dissolution for submission to the shareholders. Under this method, the corporation must give its nonvoting shareholders notice of the meeting, the proposed action, or the action taken, as applicable.
Step 2: File Articles of Dissolution
Next, Articles of Dissolution should be filed with the Oregon Secretary of State’s office. Their office has a sample form on-line, which can be found here. (The form may be changed from time to time, so make sure you are using the most current version.) As of the time of publication of this article, the Oregon Secretary of State’s office charges a $100 fee to make this filing.
Step 3: File Form 966
IRS Form 966 must be then filed. As the instructions for that form explain, “A corporation (or a farmer’s cooperative) must file Form 966 if it adopts a resolution or plan to dissolve the corporation or liquidate any of its stock.” The form should be filed within 30 days after the resolution or plan is adopted to dissolve the corporation or liquidate any of its stock. A certified copy of the plan of liquidation (see below) or a certified copy of the resolution authorizing the liquidation must be attached to Form 966.
On a tax-related note, keep in mind that the corporation’s dissolution may result in substantial tax consequences to the corporation and the shareholders, and so you should definitely consult with a tax attorney or accountant before dissolving the corporation.
Step 4: Plan of Liquidation (Optional)
The board of directors or shareholders usually adopt a plan of liquidation that sets forth the procedure by which the corporation will wind up and liquidate its business. Unless your business was just started and does not have any assets, debts or creditors — a plan of liquidation is not necessary if the corporation is dissolved by its incorporators or initial directors under ORS 60.621 — a plan of liquidation should be put in place to properly wind down the business, and to satisfy any remaining obligations and debts.
Step 5: Notice (Optional)
Unless the corporation does not have any debts or creditors, it may dispose of known and unknown claims against it by following certain notice procedures set forth in ORS 60.641 and ORS 60.644. Under ORS 60.645, a claim against a dissolved corporation that is not barred under those statutes may be enforced against the corporation and, in some circumstances, against the corporation’s shareholders.
It is necessary to follow all of the above steps in properly dissolving an Oregon corporation. Otherwise, claims may not be properly disposed of, and the shareholders could later be liable for outstanding debts and obligations, even though the business is no longer operating.
If you are interested in dissolving your Oregon corporation, or you are considering a corporate transition — especially if your business is in or around Portland, Oregon — please contact us.
Author: Andrew Harris
To continue reading more about the laws that might affect your business, please see the Articles page, or to simply see a list of helpful legal resources for Oregon startups and businesses, please see the Legal Resources page.
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