Dissolving a Texas Business

Texas law sets out how a company winds up. For an LLC, many company agreements set the vote needed to approve it, and Texas law supplies a default if they don't. A corporation needs the written consent of all shareholders or a board resolution the shareholders approve. The company must then notify known claimants in writing and pay or provide for its debts before anything goes to the owners.

After termination, the company continues to exist for a set period for limited purposes, such as defending claims, and most claims not brought within that period are extinguished.

The Secretary of State won't accept a certificate of termination from an LLC or corporation without a certificate of account status from the Comptroller showing its state taxes are paid. A printout of the Comptroller's franchise tax status page doesn't qualify. The company first files any outstanding franchise tax and information reports, including a final report, and pays what it owes, then requests the certificate from the Comptroller. The certificate is valid only for a limited time, so the termination has to be filed before it expires.

If the company's property won't cover its debts, Texas law requires it to apply what it has to a just and equitable discharge of those debts, and the owners receive nothing. That usually means negotiating payoffs and payment plans with landlords, lenders and vendors, and when negotiation won't work, we coordinate with bankruptcy counsel.

Closing isn't always the answer. If one owner wants out, a partner buyout may fit better, and a business that still has value may return more to its owners through a sale.