To dissolve a corporation in Michigan, the board adopts a resolution recommending dissolution, the shareholders approve it by majority vote, and the corporation files a Certificate of Dissolution with the Michigan Department of Licensing and Regulatory Affairs for a $10 fee. That filing is the easy part. The wind-up that follows — paying debts, notifying creditors, closing out taxes, and handling employees — is where the real work sits, and where former officers and directors can pick up personal liability if steps are skipped.
The Board Resolution and Shareholder Vote
Voluntary dissolution runs through MCL 450.1804. The board of directors first adopts a resolution recommending dissolution and submits it to the shareholders. Unless the articles of incorporation set a higher threshold, dissolution passes with the affirmative vote of holders of a majority of the outstanding shares entitled to vote.1Michigan Legislature. Michigan Code 450.1804 – Dissolution by Board and Shareholders That is a majority of all outstanding shares, not just those present at the meeting. A vote that clears a quorum but not a majority of outstanding shares does not authorize dissolution.
Once shareholders approve, the corporation files a Certificate of Dissolution with LARA. The fee is $10.2State of Michigan. Domestic Profit and Professional Corporations Filing Fees Filing sets the effective date of dissolution and starts the wind-up period.
What Happens After the Certificate Is Filed
The corporation still legally exists after dissolution, but it cannot carry on normal business. Under MCL 450.1833, its activities are limited to winding up: collecting assets, selling or transferring property not distributed in kind, paying debts and liabilities, and doing whatever else is needed to close out its affairs.3Michigan Legislature. Michigan Code 450.1833 – Winding Up Affairs of Dissolved Corporation The corporation can still sue and be sued during this period. Pending lawsuits do not vanish because a certificate was filed.
Notifying Creditors to Cut Off Future Claims
Michigan gives a dissolving corporation a structured way to close the door on claims, but the notice rules have to be followed. Under MCL 450.1841a, the corporation may send written notice to known claimants at any time after the effective date of dissolution. The notice must give each claimant at least six months to submit a claim, and any claim not submitted within the stated deadline is barred.4Michigan Legislature. Michigan Code 450.1841a – Notice to Existing Claimants
For unknown claimants, MCL 450.1842a allows the corporation to publish a dissolution notice in a newspaper of general circulation. The published notice must state that any claim not commenced within one year of the publication date will be barred. Skip these notices and claims can surface years later, with former directors and officers still on the hook.
Federal Tax Filings
Dissolution does not close a corporation’s account with the IRS. Three federal steps need to happen.
Form 966 Within 30 Days
Within 30 days of adopting the dissolution resolution, the corporation must file IRS Form 966, Corporate Dissolution or Liquidation. The form asks for the corporation’s name, EIN, dates of incorporation and dissolution, and outstanding shares at dissolution, and a certified copy of the resolution must be attached.5Internal Revenue Service. Form 966 Corporate Dissolution or Liquidation If the resolution is later amended, a new Form 966 is due within 30 days of the amendment.6eCFR. 26 CFR 1.6043-1 – Return Regarding Corporate Dissolution or Liquidation Many corporations miss this window because they file it alongside their final tax return. It is triggered by the board resolution, not the tax year.
Final Form 1120
The corporation files a final Form 1120 for the tax year in which it dissolves, with the “final return” box checked. Capital gains and losses from liquidating assets go on Schedule D. The EIN account itself is closed by sending a letter to the address where the final return was filed, stating the reason for closure and including the EIN, business name, and address.7Internal Revenue Service. Closing a Business
Shareholder Distributions
Shareholders who receive liquidating distributions generally treat them as payments in exchange for their stock under IRC Section 331. The distribution triggers capital gain or loss measured against the shareholder’s basis in the stock, whether the distribution is in cash, property, or both. The result is capital gain treatment, not ordinary income.
Employee Obligations
If the corporation had employees, a separate set of duties runs alongside the state filings.
WARN Act Notice
Employers with 100 or more full-time employees must give at least 60 days’ written notice before a plant closing or mass layoff under the federal WARN Act. Notice goes to affected employees or their union representatives, the state dislocated-worker unit, and the chief elected official of the local government where the closing occurs.8Office of the Law Revision Counsel. 29 USC 2102 – Notice Required Before Plant Closings and Mass Layoffs A narrow exception applies when the employer was actively seeking capital that could have avoided the shutdown and reasonably believed notice would have scared off the investment, but even then the employer must give as much notice as practicable.
COBRA Continuation
Corporations that maintained a group health plan and employed 20 or more people trigger a COBRA qualifying event on termination. Affected employees, along with covered spouses and dependents, must receive notice of their right to continue coverage at their own expense.9U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers Part-time employees count toward the 20-employee threshold as a fraction based on hours worked.
Final Paychecks
Federal law does not set an immediate deadline for final paychecks, but state-level rules can.10U.S. Department of Labor. Last Paycheck Check current Michigan wage-payment timing before scheduling the last payroll.
Debts Come Before Shareholders
MCL 450.1855a is direct: debts first. Before any assets go to shareholders, the corporation must pay or make adequate provision for all known debts, obligations, and liabilities, including those reasonably anticipated to arise after the effective date of dissolution. Only after that is satisfied can remaining assets go to shareholders according to their respective rights and interests.11Michigan Legislature. Michigan Code 450.1855a – Provision for Debts Obligations and Liabilities; Distribution of Remaining Assets
“Adequate provision” has a specific meaning. The board may satisfy the requirement by arranging for a financially responsible corporation or person to assume or guarantee the obligation, so long as the board determines in good faith and with reasonable care that the arrangement is sufficient. A dissolving corporation can close its books without waiting for every contingent liability to mature, but the arrangement has to hold up to scrutiny.
Personal Liability for Payroll Taxes
One liability follows people, not the entity. If a dissolving corporation owes withheld income taxes or the employee share of FICA, the IRS can assess the Trust Fund Recovery Penalty under IRC 6672 against any “responsible person” who willfully failed to collect, account for, or pay over those taxes. Responsibility turns on a person’s duty, status, and authority, which means corporate officers, directors, and sometimes bookkeepers can be personally liable.12Internal Revenue Service. Trust Fund Recovery Penalty (TFRP) Overview and Authority The penalty equals the full amount of the unpaid trust fund taxes. It reaches only the withheld portion, not the employer’s share of employment taxes. Settling payroll tax obligations before completing dissolution is one of the most important protections available to officers.
Keeping Records After Dissolution
The corporation ends, but its records should not. Financial statements, board resolutions, tax returns, and creditor correspondence should be preserved for at least seven years after the final tax return is filed. The IRS audit window is three years for a standard return, six years if income was substantially underreported, and unlimited in cases of fraud.7Internal Revenue Service. Closing a Business If a claim or audit surfaces later, documented compliance is what protects the people who ran the corporation.
Changing Course Before Assets Are Distributed
A corporation that voted to dissolve can reverse the decision as long as its assets have not been fully distributed and no court-supervised winding-up is pending. MCL 450.1811 offers two routes. All shareholders can sign a certificate of revocation. Or the board can adopt a resolution revoking the dissolution, submit it to the shareholders under the same majority required to approve the dissolution, and file a certificate of revocation with the state.13Michigan Legislature. Michigan Compiled Laws 450.1811 – Revocation of Dissolution Proceedings Once assets are fully distributed, there is nothing left to revoke.
When Dissolution Is Not Voluntary
Not every dissolution starts with a board vote. A corporation that fails to file its annual report or pay the associated fee is automatically dissolved under MCL 450.1801, without a hearing or court order.14Michigan Legislature. Michigan Code 450.1801 – Dissolution of Corporation Owners often discover this only when a license renewal or transaction fails because the entity is no longer in good standing. Reinstatement requires curing the delinquency and filing back reports, and it follows a different track than the voluntary process laid out above.
Circuit courts can also order dissolution in certain circumstances, including Attorney General actions under MCL 450.1821 and shareholder petitions under MCL 450.1823 involving deadlock, fraud, or waste of corporate assets.15Michigan Legislature. Michigan Code 450.1821 – Action by Attorney General for Dissolution16Michigan Legislature. Michigan Code 450.1823 – Judicial Dissolution Grounds Judicial dissolution is treated as a last resort, and courts often look first at less drastic remedies such as buying out the petitioning shareholder.