If you’re starting an LLC, the business entity formation process is one of the first and most important hurdles. This step can be terribly complex ...
How to Dissolve an LLC
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on January 8, 2022
Updated on April 29, 2023
If you have a limited liability company (LLC) and you go out of business, it’s important to go through the process of dissolving your LLC to protect your company from future liability. It’s best to do it quickly so that you can move on to your next venture.
If you don’t dissolve your LLC, your state will assume that you are still in business and you’ll still be required to file annual reports and pay annual fees, as well as pay any applicable minimum taxes. Not doing so could result in fines.
How to Close Your LLC in 7 Steps
It’s important to take all the necessary steps to properly dissolve your LLC, which involve more than just filing paperwork with the state.
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 need to draft a resolution confirming the dissolution and keep it as a record.
2. Notify Creditors
If you have any outstanding debts, you need to inform your creditors in writing that you are 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.
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.
4. Notify Tax Departments
You’ll need to notify all applicable taxing authorities of your impending dissolution to make sure that all taxes are paid in full.
5. Settle All Financial Obligations
You need to make sure that all financial obligations are settled including payroll, leases, contracts, or any other financial or contractual matters. You’ll also need to liquidate any physical assets that your LLC owns so that the assets can be distributed.
6. Distribute Assets
At this point, all your financial obligations should be settled, and so now any remaining assets can 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.
7. File Dissolution Papers
The final step is to file Articles of Dissolution with your state. The process and fees to do so vary by state, so check your state’s website for requirements. You may need to show verification that all your tax obligations are satisfied with your dissolution paperwork. If you are registered as a foreign LLC in other states, you must complete the dissolution paperwork in those states as well.
Closing a business is not a good time for anyone, but you need to do it correctly to avoid issues in your future ventures. It’s always a good idea to have an attorney involved to make sure that no mistakes are made.
You want to avoid any future liability and keep yourself in good standing in the business community so that you can move on and make your next business a huge success!
How to Dissolve an LLC
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