LLC Dissolution – How to Dissolve your Limited Liability Company!
When it is time to wind down and close the doors of your limited liability company (LLC), there is a process that needs to be followed which is composed of multiple key steps.
These key steps would minimize the liability your company could face which could range from lawsuits to penalties or fees imposed by the government.
It will be time to officially dissolve your limited liability company when you have settled the debts that you have incurred with every creditor you have loaned from after a notice was sent months prior to notify them that the business will be shutting down.
Your limited liability company will have to be dissolved through the secretary of state or the corporation’s division of your state which can be done by filing the needed forms.
It is through the dissolution of your limited liability company that you are guaranteed to no longer be charged with paying business taxes or being liable to file annual reports while paying for annual fees.
Failure to successfully dissolve your limited liability company can cost thousands of dollars in penalties and dues that could pile up over the years.
The official dissolution of your limited liability company will make creditors recognize the fact that your business would no longer be able to incur debts.
There are certain states that have laws designed to protect creditors and customers from LLCs when it comes to its dissolution by permitting creditors and customers to sue the LLC for a lengthy period of time when the LLC does not notify them of its dissolution.
There are specific rules and regulations when it comes to having a limited liability company dissolved which you can retrieve and check on from your presiding state.
The process of dissolving an LLC usually goes as follows:
Vote to dissolve the LLC
The step that will start the dissolution of your limited liability company is for the LLC’s members to formally agree to have the business closed.
Voting to have the business dissolved will follow the procedures that were detailed on the LLC’s organizational documents such as its articles of organization, articles of incorporation or its operating agreement.
If the organizational documents of the limited liability company lack the procedures that should be taken for dissolution, it will be the presiding state’s business statutes that will be followed.
The votes of the LLC members to dissolve their business entity should be documented in the minutes of meeting, a resolution or a written consent form that will be placed into the records book of the limited liability company.
File the proper dissolution forms
Once the members of the LLC have voted to have their business entity dissolved and a record of this vote has been made, the dissolution form will need to be retrieved which can be done through your presiding state’s corporate division or secretary of state’s website.
The dissolution forms needed can be known as a certificate of cancellation, articles of dissolution or a certificate of dissolution.
It is also possible that the dissolution forms be named something else entirely albeit it will be identical to the aforementioned document names though its purpose will still be the same.
In most cases, the dissolution forms will only ask you to supply information that identifies you and your business though there are states that would also ask if the owners of the business have managed to settle every debt and liability they have and if the assets that remained after, if there are any assets that remained at all, have been distributed already.
It is typical for states to charge a fee for filing dissolution forms though the fee is minimal in nature.
Refer to your presiding state’s instructions on filing dissolution forms to know the fee that needs to be paid.
After the dissolution forms have been filled, those forms will need to be sent to the state.
When sending your filled in dissolution forms, you will have to include a cover letter that reflects the name of your LLC, the LLC’s number, and your own name, telephone number and return address.
If you need to pay a fee, do not forget to include the payment when sending the forms back to the state.
Those who opt to send the forms through mail rather than submitting the forms electronically can send the dissolution forms via certified mail with a request for a return receipt.
The state has to send your dissolution forms or similar documents back to you for the filing of those forms in the records book of your limited liability company.
If you need to clarify something or have questions on the paperwork needed, several states make direct to the point rules and instructions available on their respective websites.
Cancel out of state qualifications or registrations
In cases where your limited liability company has been registered to conduct business in multiple states, you will also have to file the forms that withdraw your rights to transact and conduct business in those states.
The forms needed to cancel out of state qualifications or registrations can also be known as a certificate of surrender of right to transact business, termination of registration, certificate of termination existence, and application of withdrawal.
Failure to file the necessary forms to cancel out of state qualifications or registrations will result in you being continuously liable to pay for annual report fees in addition to minimum taxes to each state you are still registered to even if your business has completely stopped all of its operations.
Get a tax clearance if necessary
There are states that will require the procurement of specific documents from your presiding state’s tax agency before they will process your LLC’s formal dissolution.
Documents you will need to obtain if necessary, include a verification of good standing, a consent to dissolution and a tax clearance.
In the states where the documents mentioned are required, the corporation’s division or the secretary of state will not permit the dissolution of your limited liability company unless the last tax return of your business has been filed and every pending tax owed has been paid.
The last tax return will have the “final tax return” box checked with the words FINAL written at the top.
Obtaining the consent or clearance of your presiding tax agency can be done by submitting a request either by mail or electronically.
If your tax payments are up to date on both your tax returns and state taxes, a certificate or letter that declares that you are free from any tax liability will be sent to you.
Wind up your business
Along with filing the necessary documents that will be asked of you with the state, other functional actions will need to be taken to successfully wind up your business such as the complete settlement of the company’s debts, informing creditors of dissolution, putting equipment and inventory on sale and liquidating the remainders of the business’ assets.
The failure to correctly wind up your LLC could lead to you and other limited liability company members being personally responsible and liable for every debt and obligation the business has.
FundsNet requires Contributors, Writers and Authors to use Primary Sources to source and cite their work. These Sources include White Papers, Government Information & Data, Original Reporting and Interviews from Industry Experts. Reputable Publishers are also sourced and cited where appropriate. Learn more about the standards we follow in producing Accurate, Unbiased and Researched Content in our editorial policy.