Legal Question in Business Law in California

Yes, when a corporation winds up and dissolves the assets go first to any creditors, and then the balance is distributed to the shareholders. Most commonly the assets may be converted to cash by the corporation and then distributed, and the corporate existience continues until that is completed, but in the case of a closely held corporation, the receivables can be transferred directly along with any physical assets. Just be sure to document in the corporate records book a board of directors resolution transferring the receivables, in case they challenge your standing in court to collect the debt owed the corporation originally. Also you should consult with an accountant as to how to treat the distribution for taxes. It may be tax advantaged to keep the corporate shell in existence until the receivables are collected, or it may not.

The Board of Directors needs to authorize the transfer of any accounts receivable. Consult with a local attorney in your area for advice on the specifics of your situation.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney