BusinessCorporationsTaxes

Should I Dissolve my Corporation?

A corporation is an agreement or contract made by nationals or foreigners through which they mutually commit themselves to contribute capital (money, goods, etc.) in general to create a business. While it is true, it is not the only reason why people create a corporation, we must determine when it is necessary to create a corporation and when not.

Currently, it is common for people to have one or more corporations: a corporation that owns a property, another one owns a car, another on owns a business, among others. Depending on the situation or what your goal is, having a corporation may or may not be viable.

There are many advantages and disadvantages of having a corporation so we recommend that you consult with your lawyer to make the correct decision according to your case, this is because sometimes corporations are created without a purpose.

If you already have a corporation and do not use it, it would be reasonable to think about dissolution, since having a company that does not generate profit or that no longer has a specific purpose only generates unnecessary expenses. For example, in Costa Rica even if a company does not carry out commercial activities, it must pay annually the Corporate Tax starting at ¢ 67,530 colones. To this we add the Annual Registry of Transparency and Final Beneficiaries that startedlast year, 2019, and the duty to register and declare the assets of inactive corporations using Form D-135.

The Commercial Code establishes the reasons why a company can be dissolved:

1- Expiration of the term indicated in the certificate of incorporation.

2- Impossibility of achieving the objective or purpose for which the company was established, or the actual realization of that objective.

3- Loss of half of the company’s capital stock (unless the partners replenish that capital or agree to decrease the capital).

4- Agreement of the partners.

 

If by any of the above points you decide to dissolve your company, you must keep in mind that you must follow a series of steps to complete the simple process to dissolver it, avoiding the more complex one of ‘liquidating’ the corporation prior to its dissolution.

– The first step is to make sure you are up to date with taxes.

– Process payment of debts to creditors.

– If your company has assets, you can sell, donate, or transfer them over to yourself, another individual, or another legal entity (corporation or another kind of entity).

– Submit the dissolution request before a notary public.

If you would like information or you want to proceed with the dissolution of your corporation, please contact our Business Team.

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Yazmín Ureña

Yazmín Ureña

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