If you’re starting a business, you may be thinking about forming a limited liability company (LLC). Many questions arise during the process of starting an LLC, one of which is how long does an LLC last. The answer is, well, it depends.
Articles of Organization
By default, an LLC exists indefinitely unless it is dissolved by the members. However, in the articles of organization, the document LLCs file to register with the state, members can specify an end date for the LLC. This might occur if the LLC is being setup for some temporary purpose.
Depending on your state, the articles of organization may be called a Certificate of Organization or a Certificate of Formation. It will specify details about your company and establish your LLC as a registered business entity in your state.
The LLC may end by dissolution, either by a voluntary action by the members or by judicial action. Voluntary dissolution may occur if the business fails, if the business is moving to another state, or for other reasons.
Judicial dissolution may occur if a court orders the dissolution because the company cannot meet its fiduciary obligations or the LLC is involved in illegal or fraudulent activity.
Additionally, a state may order dissolution if the LLC is not complying with state regulations, such as the filing of annual reports or paying annual fees.
How to Dissolve an LLC
It’s important to take all the necessary steps to properly dissolve your LLC, which involve more than just filing paperwork with the state.
Step 1 – Vote for Dissolution
Members of the LLC must hold a vote to dissolve the LLC. Your operating agreement should outline the voting process. If it does not, or if you don’t have an operating agreement, you’ll have to check the procedures outlined in your state’s laws for dissolution and follow that process. Once the vote is complete, you’ll need to draft a resolution confirming the dissolution and keep it as a record.
Step 2 – Notify Creditors
If you have any outstanding debts, you’ll need to inform your creditors in writing that you’re going out of business and dissolving your LLC. You’ll also need to give them specific instructions about how and when to submit any claims. Per state laws, claims usually need to be submitted between 90 and 180 days of the written notice that you provide.
Any claims after the deadline will not be valid. Some states require that this notification be done before filing your dissolution papers. Even if it’s not, you should do so anyway, so you don’t burn any bridges in case you start another business and need credit again.
Step 3 – Cancel Business Licenses
Contact your state and local government offices that have issued you licenses or permits to cancel them and make sure that no fees are owed.
Step 4 – Notify Tax Departments
Notify all applicable taxing authorities of your impending dissolution to make sure that all taxes are paid in full.
Step 5 – Settle All Financial Obligations
Make sure that all financial obligations are settled, including payroll, leases, contracts, and other financial and contractual matters. You’ll also need to liquidate any physical assets that your LLC owns so the resulting funds can be distributed.
Step 5 – Distribute Assets
At this point, all your financial obligations should be settled, and any remaining assets should be distributed to members. According to state laws, financial obligations must be settled before this is done. These distributions will be based on the ownership percentage of each member.
Step 6 – File Dissolution Papers
The final step is to file Articles of Dissolution with your state. The process and fees vary by state, so check your state’s website for requirements. You may need to show verification that all your tax obligations have been satisfied with your dissolution paperwork.
NOTE: If you’re registered as a foreign LLC in other states, you must complete the dissolution paperwork in those states as well.
The good news is that if you do everything right, your LLC will last indefinitely unless you choose to dissolve it. The bad news is that if you don’t do everything right, the decision to dissolve could be made for you.