11.16.18 | Business Law

Reasons For Business Dissolution

Many businesses simply decide to close their doors. However, if you want to legally close your business you are going to need to get it dissolved. This is especially true when there are partners. All of the partners are going to have to work together to end the business with a dissolution.

So, why would you want a dissolution for your business? Here are some of the common reasons why you might decide to close up shop.

Reasons for a Business Dissolution

Low Cash Flow

One of the most common reasons that businesses close their doors is because they don’t have enough cash flow to get them through the tough times, just hoping for better ones!

These business owners should be praised for being smart. They aren’t going to rack up debt just trying to keep their business afloat.

Bad Management (or Accounting)

There is a lot of work that goes into being a business partner. Unfortunately, it is not for everyone. Bad decisions (both for the company vision and with the finances) can drag a business down quickly. With a dissolution, you will no longer have to worry about your business debts.

Too Much Competition

Competition, even in business, can be a good thing. It makes you work harder and try to be better (or even make better products). There are times when there is such as thing as too much competition. This can mean that you have to price your products and services too low, cutting back on your profit (if you have any at all)!


Unfortunately, the health of the economy really does affect businesses. When the economy is doing well, money is flowing (no matter what you are selling). When it is struggling, people are going to cut back on some unnecessary (and sometimes necessary) items. Many businesses, especially luxury items, get hit hard when the economy is struggling.

Product Liability

If you are producing defective products (with or without your knowledge), you could be forced into a dissolution. If you just close it, you could be facing a lot of liability claims that could last for years. Because of this, if you dissolve your business, you won’t be held responsible.


There are times when a business has no choice but to file bankruptcy. However, before that can be done (to get out of debt), you must file for dissolution of your business. You can’t file for bankruptcy without doing so first.

Failure to plan for the future

Anytime that a business gets started, a plan for the future needs to be given some considerable thought. Family businesses usually stay in the family, though you can appoint anyone to take over when you are ready to retire. When no one is appointed, a business must be dissolved when the business owner decides to retire.

Disagreements between Partners

When there are partners, there are always going to be disagreements. However, there are times when they just can’t solve their problems to keep the business running. They might argue about their roles in the business or big changes that one wants and the other doesn’t.

Whenever there are partners, they are going to have to go through a dissolution to close the business. This should be a part of their business agreement that they signed when they first started the business.

Though you may have the brightest hopes for your business, there are times when it must get dissolved. Legally, it is the best way to close a business so that you aren’t stuck with the debts and contracts that your business had.

One of the most common reasons to close your business is because of low cash flow. Accumulating more and more debt is not the way to get through the tough times! If you end up producing defective products or even are facing bankruptcy, you are going to need a business dissolution to protect yourself.

Contact us for all of your legal needs. We will be glad to help you through this difficult transition.

Work With Our Miami County Legal Team

Whatever your demands, Dungan & LeFevre is the full-service law firm you need. We can help you explore your options, guide you through challenges, and represent you in court. You can rely on our experience and knowledge to steer you to your best decision for the most reasonable price. Get started with a consultation.