Corporations must file articles of incorporation with the secretary of state in order to enter into existence. Each must thereafter annually file registrations, franchise taxes or information reports with the secretary of state to adhere to state corporate administrative requirements. Failure to do so will result in an abandoned, administratively dissolved corporation. Corporate officers can also elect to officially abandon the corporation by filing documentation with the state.
Corporations are separate legal entities with constitutional rights akin to that of a natural person. Corporations can transact business, own and hold property, incur liabilities and accrue wealth. In addition, corporations have perpetual lives. Unless a corporation's article of incorporation specifically provides for a terminal date or event for the corporation, the corporation will continue to exist long after its original owners and investors' deaths. In order to "kill" a corporation, its board must dissolve it. The board can do this voluntarily or involuntarily through abandonment.
A corporation's board of directors can elect to voluntarily abandon the corporation. The secretary of state for most states require that corporations file a certificate of abandonment in order to officially abandon its business. This certificate may include several provisions including name abandonment, entity name and information and documentation of approvals. This document releases the corporation's name back into the pool of possible names that businesses can use and finalizes the process of officially dissolving the corporation.
A corporation's board can opt to continue the company but physically abandon it. The company’s owners or board abandons by simply shutting down the company and ceasing to operate as a going enterprise. The company may close its bank accounts, or allow the accounts to dwindle so low that the bank automatically closes them. The company may keep intangible assets on a server and intangible assets in a storage facility. Alternatively, the company may sell off all its assets. All physical abandonments include the failure to meet annual state filing requirements.
If the owners shutter the corporation and fail to file annual registrations or franchise taxes, the state will administratively dissolve the corporation. If the Board distributes all of the assets to the corporation's shareholders and later one or more creditors -- including the state franchise tax board, if applicable -- pursue payment, the shareholders will be liable up to the amount of the par value of their stock.
Owners who abandon and fail to submit annual filings must not conduct any business while their businesses are in the suspended state. Once a corporation has not opted to reinstate within three or four years following an administrative dissolution, the state will permanently dissolve the corporation. The specific amount of time depends on the state.