Recently, I watched a Seattle Arts and Lectures interview of Microsoft founder Bill Gates by CNN reporter Anderson Cooper, in which Gates discussed his new book about how we humans can avoid a climate disaster by zeroing out global greenhouse gas emissions in the next 30 years. Climate change is a gargantuan problem. While eliminating greenhouse gas emissions is the inevitable solution, achieving that goal is going to be difficult, to understate the challenge. In the interview, Gates emphasized the importance of fostering innovation to facilitate the development of cleaner technologies — and to reduce the cost of those cleaner technologies — in existing industries. One thing that Gates said (aside from professing a love of PowerPoint) struck me: In the search for solutions, “There are going to be a lot of failures.” In fact, he expects 80 percent of the promising companies with brilliant ideas for innovating greener technologies will fail.
Many new businesses fail. According to the U.S. Small Business Administration (SBA), one-third of businesses with employees fail within the first 2 years. In addition, SBA data also shows that about one in twelve businesses close each year. Not all the businesses that close shop are doing so because they fail. Some businesses close because the owner wants to retire, others because the owner has health issues or family commitments incompatible with running the business, and still others (about 6 percent, according to the SBA) close because the owner is starting a different business.
When a business entity, such as a corporation or limited liability company (LLC), is formed to operate a business, what happens to the entity when the businesses shuts down? Just because a business ceases to operate does not mean that the business entity automatically ceases to exist. I have previously blogged about the steps that a Washington LLC must follow in order to dissolve and wind up its affairs. Unsurprisingly, corporations have a similar – but not identical – set of statutory requirements for winding up.
A corporation is dissolved by a vote of its shareholders and directors pursuant to RCW 23B.14.020. Before dissolving, the corporation must obtain a Revenue Clearance Certificate from the Washington Department of Revenue to confirm all state licensing fees and taxes owed by the corporation have been paid. After the decision to dissolve the corporation has been made, RCW 23B.14.030 requires the corporation to file Articles of Dissolution with the Washington Secretary of State and to publish notice of the dissolution in order to allow anyone with claims against the corporation an opportunity to pursue those claims. After a corporation is dissolved, pursuant to RCW 23B.14.050, it continues to exist for the purposes of winding up its affairs and liquidating the business assets. During the winding up process, the corporation collects its assets, pays its liabilities, and then distributes any remaining property to its shareholders.
Stopping climate change is one endeavor in which failure is not an option. However, achieving the goal of zero greenhouse gas emissions will involve many ideas that, for one reason or another, will fail. In a best-case scenario, many businesses will be formed to pursue ideas that might solve one piece of this very complex puzzle. While a fraction of these businesses will succeed, most will fail, and that’s okay. But, before moving on to the next great idea, it is important to make sure that the affairs of the business that didn’t pan out are properly wound up. Questions about winding up your business? We’re happy to help.
This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.