Beyond Dissolution: Legal Alternatives for Companies in the U.S.

When your business faces declining revenue, limited runway, or market shifts, shutting down the company might seem like the answer. But it’s permanent, and often not the most strategic move if you still have assets, a capable team, or growth potential. Here’s how alternative paths can help preserve value and open new opportunities.

Merger or Acquisition (M&A)

If your company still has valuable assets, intellectual property or a customer base, another business may be interested in acquiring it. This could be through a merger, where you combine operations with another company, or an acquisition, where your business is purchased outright. M&A can be an attractive option if you want to exit while securing a return for shareholders and possibly keeping your team employed under the new structure. Why it could work:

• Preserves value: Brand, technology, or customer base might have more value as part of a larger organization.
• Provides a financial return: Even if the business is struggling, a buyer might see strategic benefits worth paying for.
• Keeps a team in place: In many deals, employees are retained and integrated into the acquiring company.

For many entrepreneurs, M&A is not only a financial solution but also a way to see their work live on in another organization. The key here is preparation: have your financials, contracts, and intellectual property in order before starting conversations with potential buyers.

A real-world illustration of this approach came in 2024 when OpenAI acquired the team behind the AI collaboration platform Multi. The startup had strong talent and technology but struggled to scale on its own. Instead of dissolving, the founders chose acquisition, allowing their vision to continue within OpenAI’s broader roadmap. The team joined to develop new AI-powered collaboration tools, preserving jobs, leveraging their expertise, and expanding their impact. This case highlights how M&A can turn a potential end into the start of a new chapter.

Pivoting the Business

Sometimes the problem is not the company itself but its direction. Pivoting means changing the product, market, or business model to pursue a more promising opportunity. This could involve repurposing your technology for a new industry, shifting from consumer to B2B sales, or moving from a subscription-based model to one-time purchases.

The success of a pivot relies on data-driven decisions. Speaking to customers, analyzing trends, and understanding your economics should guide the change. Many successful companies owe their growth to a pivot — Slack famously began as a tool for internal communication in a gaming company before becoming the workplace platform used globally. By testing small, iterating quickly, and aligning your team, a pivot can revive a struggling business without erasing the value you’ve already built.

Raising a New Investment Round

If your business fundamentals remain strong but your runway is short, securing additional funding can be a viable option. This funding could come from existing investors, venture capital firms, angel investors, or strategic partners.

Raising capital in a challenging period requires a compelling plan that outlines how the funds will directly address current obstacles and set the business on a growth path. Investors will expect realistic milestones, a strong business case, and, in some cases, revised ownership terms. Flexible financing instruments like convertible notes or SAFEs can also be considered.

In early 2009, Airbnb was running out of money. At that point, they secured $600,000 in seed funding from Sequoia Capital after participating in Y Combinator’s accelerator program. This small but crucial investment gave Airbnb just enough runway to refine its product, expand its user base, and position itself for later growth. Without that round, Airbnb’s story could have ended before it began.

Selling Assets Without Dissolving

Selling specific assets while keeping the legal entity active can generate cash and reduce operational complexity without closing the business entirely. These assets might include patents, trademarks, proprietary software, inventory, or physical property.

A well-known example is IBM’s sale of its personal computer division to Lenovo in 2005. IBM sold that business line to focus on higher-margin enterprise services and software, while still retaining the rest of the company. This move freed capital, reduced operational complexity, and allowed IBM to double down on areas with greater growth potential.

This approach works well when certain parts of the business are more valuable to others than to you, or when you want to streamline operations to focus on a different strategy.

Strategic Partnerships

A strategic partnership involves collaborating with another company to share resources, co-develop products, or expand market outreach without merging or selling outright. Partnerships can provide access to customers, technology, or distribution channels you could not reach alone.

A strong example is Optoro and IKEA. Oporto is a reverse logistics startup, processes returns and excess inventory for retailers. In 2019, it partnered with IKEA to manage and streamline returns, rather than head toward a potential shutdown of unprofitable operations. This partnership helped Optoro gain visibility and build momentum in the logistics space, even when its e-commerce site underperformed and was eventually shut down in 2021.

Partnerships are often faster and less complex to set up than acquisitions, and they allow you to maintain independence while gaining valuable capabilities.

Choosing the Right Path

The best alternative to dissolution depends on your assets, market conditions, and personal goals as a founder. Each option has its advantages and trade-offs:

When Dissolution Becomes the Necessary Step

While this article focuses on alternatives, it is important to recognize that formal dissolution may be the right choice when no viable strategy remains to preserve or repurpose the business. In the U.S., dissolution follows a structured legal process that typically includes:

• Approving a dissolution resolution at the board and shareholder level.
• Settling state and federal tax obligations.
• Filing dissolution documents with the state where the company is registered.
• Filing a final federal tax return with the IRS.
• Requesting closure of the company’s EIN account once all obligations are satisfied.

Although dissolution formally winds down the entity, it should be approached only after all value-preserving alternatives have been thoroughly evaluated. For a detailed overview of how to properly close a U.S. company, see our guide here.

Final Thoughts

Dissolution may seem like the easiest option when times get tough, but it should rarely be the first move. Exploring alternatives can preserve the value you have created, protect your team, and even lead to your next big success. With the right strategy and execution, what feels like the end could simply be the turning point toward a new chapter, and if dissolution is ultimately the right path, Skala can help you complete this process properly.