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Business Dissolution

Business Dissolution Lawyer

Business Dissolution Lawyer

THE ORGANIZED END OF A BUSINESS

Businesses don’t last forever. Whether your business sold off all of its assets to someone else or has just run into too many problems and cannot continue to operate, the process for ending a business is called a “dissolution.” Very generally, this involves liquidating the business’ assets, winding up work in progress, paying creditors out of the proceeds, and then distributing any remaining value to the owners. The Firm has been helping businesses with the dissolution process for decades.

A PRIVATE ALTERNATIVE TO BANKRUPTCY

If your business is pushed into ending due to aggressive action by creditors, a common option is a Chapter 11 bankruptcy. A bankruptcy filing is very powerful, and gives your business a powerful defense against collection activity that cannot be matched by a private dissolution. On the other hand, a Chapter 11 filing can put your business under a microscope, giving various third parties the ability to monitor its financials and potentially interfere with operations through the bankruptcy court. Such filings can also be very expensive. Dissolution does not offer anywhere near the same level of protection as a bankruptcy, but it does not come with the same public disclosure requirements either.

CONTROL OVER A RATIONAL WIND-UP PROCESS

In a private dissolution, you control the process of liquidating assets and distributing to creditors, not the bankruptcy court. You can propose that the most important or cooperative creditors get paid first, while those who seek to jump in line and harm other creditors or disrupt an orderly dissolution process are treated differently. An attorney’s assistance is critical, however, to ensure the plan of dissolution is fair and reasonable for all creditors and to hold off overly aggressive creditors who file lawsuits seeking to torpedo the orderly dissolution process.

PRESERVING LIMITED LIABILITY

A dissolution does not discharge creditors the way a bankruptcy does. But, done properly, a dissolution can help preserve the limited liability that prevents creditors from piercing through the company to try and collect from its owners. The Firm believes one of the key elements of a proper dissolution is not taking any action that gives creditors a new claim they would not already have.

A NEW BUSINESS FOR A FRESH START

When your business closes, that does not mean you have to go out of business entirely. Owners are free to start new companies and start fresh, seeking to rebuild a new business when the old one fails. But, if this is done without advice of counsel, it is easy for an eager business owner to accidentally do something that exposes them to liability to the old company’s creditors for fraudulent transfer, successor liability, alter ego liability, or other theories. If you are interested in closing your business and starting over, and want advice on how to avoid these pitfalls, please give Moriarty Underhill a call!
Business Dissolution Lawyer

WATCH: BUSINESS DISSOLUTION IN COLORADO

In this workshop video, Moriarty Underhill walks through the dissolution process step by step.

If You Need Help With Business Dissolution, Contact Moriarty Underhill LLC Today For A Consultation!

FREQUENTLY ASKED QUESTIONS

Dissolution is a private, state-law process where the business winds down its affairs, liquidates assets, and pays creditors in an orderly way. Bankruptcy is a federal court process that offers stronger creditor protection through an automatic stay, but requires full public financial disclosure and puts a court in control of the process. Dissolution keeps the wind-down private and in the hands of the owners.

Technically no, but it is strongly advisable. Colorado law requires specific notice procedures to creditors, and mistakes during dissolution — such as improper asset transfers or skipping the formal notice process — can expose owners to personal liability they would not otherwise face. An attorney also helps hold off aggressive creditors who may try to derail the process.

Creditors do not lose their claims automatically. The dissolution process involves notifying creditors and paying them out of the business’s remaining assets in a commercially reasonable order. Creditors who are properly notified under Colorado law have a two-year window to bring claims, after which their right to pursue the dissolved company is generally cut off.

Generally no, provided the dissolution is handled correctly. The limited liability protection that formed the basis of the company continues through a proper dissolution. However, owners can expose themselves to personal liability if they make improper asset transfers, make distributions to themselves before creditors are paid, or take steps that give creditors grounds for a fraudulent transfer or successor liability claim.

Yes. Owners are free to form a new company and continue operating. However, if the new company acquires assets from the old one without paying fair value, shares the same owners, name, or customers, and does not clearly establish itself as a separate entity, creditors of the old company may argue the new company is a successor and pursue it for the old debts. Proper legal guidance before forming the new entity is essential.