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I am in the process of dissolving an s-corp in CA. We have…

Second opinion] HI! I...

Second opinion] HI! I am in the process of dissolving an s-corp in CA. We have creditors, however they are all small personal loans and have been verbal forgiven by those who made them. I am in the process of writing letters to them formally notifying them of our intention to dissolve. My questions: 1) Am I on the right track? 2) Can I send those letters via email? 3) What is the waiting period I must give for them to respond to my notice? I can't seem to find this info anywhere on the web. Thank you!

Lawyer's Assistant: Has anything been filed or reported?

Not yet. We just shut our doors last week. I have verbally notified them.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

I believe that's it. Thank you!

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Answered in 1 hour by:
3/7/2018
Attorney Wendy
Category: Legal
Satisfied Customers: 537
Experience: Member at Keefer & Keefer LLC
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Hello. My name is ***** ***** I am currently working on a response to your question and should have that to you shortly.

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You are definitely on the right track. The first thing is to make sure you have taken all the necessary steps formally to dissolve your S Corp. If the decision to dissolve is unanimous among the various shareholders there are few requirements but formal documentation of the decision should be made via written action noting the vote of the shareholders and board of directors (which may not be technically required if all shareholders agree but does create a complete set of documentation of the dissolution). If, however, the decision is not unanimous a Certificate of Election to Wind Up and Dissolve must be filed with the California Secretary of State. The form is available on the Secretary of State website. Once dissolution is accomplished, notice to creditors is required and this is actually the "winding up" of the business. Actual day-to-day business has ceased and now you are simply wrapping up loose ends - collecting receivables, paying payables and notifying those the corporate owes, and once all liabilities are settled distributing any remaining assets. Creditors should be mailed notice of the dissolution. You can email as well, but to ensure full compliance with any state regulations, sending via U.S. mail - preferably in a trackable manner (e.g., certified and return receipt) is advisable - will provide greater protection. This notice should include your company name, identify the debt/liability (including outstanding amount owed) and in this instance a statement confirming the debt has been forgiven and requesting notification by a set date if that is not the case. This puts you in the position of being able to show mailing to the address on your corporate books to any creditor, receipt at that address, and then if no response, at least acquiescence to the debt forgiveness. Once all debts are settled and assets distributed you will have to file a Certificate of Dissolution with the State (Form DISS STK - http://bpd.cdn.sos.ca.gov/corp/pdf/dissolutions/corp_stkdiss.pdf). That certificate will include information on all creditors at the time of dissolution and how those liabilities were addressed.

I have not seen the California time limit for creditors but 30-days is typically considered reasonable. This is also consistent with some situations in California where a creditor who cannot be reached may require publication in a newspaper for 3 weeks once a week of notice of intent to dissolve may be required. Do note that this written Notice of Dissolution should include the company's intent to dissolve, that the creditor is provided the time period to object to dissolution and/or resolve any outstanding liabilities and that after the time period allotted if no claim is made the claim may be deemed barred or waived. Notice of dissolution is also to be given to all shareholders.

If you need any additional help, please reply to this email. If I have answered your question and provided excellent service, I would greatly appreciate your 5 star rating at this time.

Please note: This information is for ​informational and educational purposes only and is not legal advice. There is no course of action proposed and no attorney-client relationship or privilege has been created as a result of this conversation.

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Customer reply replied 1 month ago
Thank you! This helps simply it for me. We have no assets so even if a creditor were to request payment we have nothing to pay them with. There are two creditors I am concerned will attempt to collect. Is it okay for me to state in the letter to the creditors that we have no assets or funds and are considering filing bankruptcy? Essentially that’s what we would do if they attempt to collect. Can I state something like that in the letter? Thank you for clarifying for me.

I probably wouldn't mention bankruptcy as there are a lot of rules about timing and notice that could be triggered by that language. I would instead simply state that this is notice ... and that per our verbal agreement, we understand that this debt was forgiven and no further payment is due. If you do believe you have a claim against the company ... Then I might add near the end that the company currently has no assets and will be winding up as quickly as possible. I hope this helps.

Attorney Wendy
Category: Legal
Satisfied Customers: 537
Experience: Member at Keefer & Keefer LLC
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Customer reply replied 1 month ago
Thank you!

You are very welcome and best of luck wrapping everything up quickly.

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