how to dissolve a corporation in Illinois

Illinois Corporate Dissolution Explained: When Should I Dissolve My Corporation?

Video by Attorney Kevin O'Flaherty
Article written by Illinois & Iowa Attorney Kevin O'Flaherty
Updated on
November 1, 2019

In last week’s article we discussed the basic strategies for business owners to deal with oppressive business debt.  These include:

Negotiation with creditors

In this week’s article, we will discuss the factors that you and your attorney should consider in deciding between these five strategies.  Determining which strategy is best for your business will depend on your particular circumstances and goals.  For the purposes of this discussion, we will assume that your business is a corporation or an LLC.

If you have a profitable business model except for a particular debt or group of debts, your first course of action should be to have your attorney contact your creditors and negotiate with them to reduce, defer, or restructure your debt in order to bring your monthly expenses low enough to allow your business to continue.

Restructuring your company’s debt through Chapter 11 bankruptcy

If some of your business’ creditors are unwilling to negotiate, you may be able to use a Chapter 11 bankruptcy to restructure your debt.  In a Chapter 11 bankruptcy, your attorney will work with your major creditors draft a plan to restructure your business’ debt.  Your creditors will then each vote “yes” or “no” to the implementation of this plan.  One of the major benefits of Chapter 11 bankruptcy is that it is possible to have the court affirm the plan despite the dissent of certain creditors. 

However, Chapter 11 bankruptcy is often prohibitively expensive.If restructuring your debts is not possible, your goal should be to liquidate your business and start fresh without any personal liability.  A corporation or LLC is properly dissolved by filing Articles of Dissolution with the Secretary of State, sending notice to all known creditors, liquidating assets, and properly distributing those assets to creditors and shareholders.

Liquidating your company through Chapter 7 Bankruptcy

Unless your business has an extremely limited set of creditors and liabilities, it is rarely advisable to simply shut your doors and walk away without following proper dissolution procedure.  If the dissolution process is handled improperly or ignored, the defunct business’ directors and shareholders can become personally liable for the business’ debts.

Often, when a company is dissolved, its principals wish to resume or continue the company’s business through a new debt-free corporation.   Depending on your circumstances, a seamless transition from one corporation to the next without business interruption may be possible through voluntary dissolution and incorporation of a new company.

However, in order to ensure that none of your distressed company’s debts follow you to your new company, a Chapter 7 bankruptcy may be advisable.  Creditors can apply your previous company’s debt to your new company if they can show that the new company is a mere continuation of the previous company, with the test being continuity of ownership.  This means that if the shareholders of the second company are identical or nearly identical to those of the first, the first company’s debts may follow its shareholders to the second company.  This problem can be solved through Chapter 7 bankruptcy.

Unlike a Chapter 11 bankruptcy, in a Chapter 7 bankruptcy, the bankrupt company does not survive the bankruptcy, but rather is liquidated to pay its creditors.  At the conclusion of the bankruptcy, the company’s debts are discharged.  This discharge allows the company’s shareholders to begin a new enterprise without worries about personal liability or the mere continuation rule.

Voluntary Dissolution

If your business is distressed, it is important to meet with an attorney to help you assess the health of your business and the state of its debts in order to determine reasonable goals as well as the best strategy to achieve those goals with a view toward the survival of your business and the avoidance of personal liability.

Additional Financial Considerations
from Financial Experts

From Financial Experts

For many years, financial institutions have been creating a disservice to clients and the industry as a whole for years.
View More Professional Considerations

Presented By O'Flaherty Law

should I dissolve my corporation?

Need Legal Help? 

Schedule a

What to Expect From a Consultation

The purpose of a free consultation is to determine whether our firm is a good fit for your legal needs. Although we often discuss expected results and costs, our attorneys do not give legal advice unless and until you choose to retain us. Although most consultations are complimentary, some may carry a charge depending on the type of matter and meeting location.

Leave a Comment With Your Questions

Read more about

Business, Corporate & Contract Law

how to dissolve a corporation in IllinoisIllinois Legal ArticlesIowa Legal ArticlesMulti-State Legal ArticlesLearn About Law Home

Business, Corporate & Contract Law

No items found.
Disclaimer: Our articles and comment responses do not constitute legal advice and are not intended to create an attorney-client relationship.

Please contact us to schedule a free consultation for legal advice specific to your situation.

Here are some articles that may interest you

Contact us for a Free Consultation

Schedule a free consultation

O'Flaherty Law is happy to meet with you by phone or at our office locations in:

Who We Are
We are your community law firm. Our Illinois & Iowa Attorneys are committed to providing exceptional client service in a cost-effective manner in the areas of Family Law, Probate, Estate Planning, Civil Litigation, Guardianship, Criminal Defense, Corporate & Contract Law, Bankruptcy and Real Estate.

Some of Our Accomplishments

Best Child Support Lawyers in Chicago
DuPage County Probate Attorney
Kevin P. O'Flaherty
Rated by Super Lawyers

loading ...
Naperville attorney
DuPage County Probate Attorney

Subscribe to our mailing list

* indicates required