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How to Dissolve an LLC?

How to Dissolve an LLC

When you first started your LLC, you must have dedicated a lot of time and effort to setting it up. Making it a legal business and carrying out the business activities requires some long procedures that you don’t want to get wrong. And on a similar note, you must follow through with some basic procedures to officially dissolve an LLC.

Why Should You Dissolve Your LLC?

During the formation of your LLC, you must’ve filed the articles of organization and other documents with the state. This document was the initial step towards setting up your business and getting it registered. Now that you’re closing your business, a final notice to the state is crucial.

This notice will notify the state that your business is no longer active or open for business. If you don’t legally dissolve your business, the state will continue to assume that your business is active. This means that you’ll still be eligible to pay taxes as well as any fines or penalties for missing out on those taxes.

The article of dissolution also provides the creditors with a final chance to make any claims, Once the business is officially dissolved, no new claims can be made.

Voting to Close the LLC?

Closing an LLC isn’t a single-member decision, it requires the vote of all members involved. If you’ve specified a particular procedure for the dissolution of your LLC in the operating agreement, you must follow through with it. In other cases, you can check with your state’s guidelines to dissolve an LLC.

In either case, you need the vote of the members to decide the future of your LLC. Once the voting is done, you must document the whole procedure along with all other documents of the LLC.

Notifying Creditors of Your Dissolution

Once you’ve decided to file the articles of dissolution, you must send a notice to your creditors to make their claims on time. In the case of an LLC, the creditors will be provided with a deadline to make their claims, after which no claims will be entertained.

In the notice shared with your creditors, the following should be clearly stated:

  • The deadline for the creditors to make their claims. This time period varies between 90 – 180 days, depending on the state you operate in. Make sure you go through your state’s LLC statutes for the same.
  • A clear indication that after the stated period, no claims made by the creditor will be accepted
  • A mail address for the creditors to share their claims

It is crucial to remember that if you are unable to notify your creditors about your dissolution, they can still make claims for the debt you owe them after the deadline. If you’re unable to pay all your dues, the creditors can file a lawsuit against you.

Some states might require you to send in the notice to your creditors even before you apply for dissolution. In other cases, it’s your call to send the notice before or after filing your dissolution. However, it’s a decent practice to send the notice priorly.

Notifying Taxing and Licensing Authorities

An equally important task is to notify the state and local authorities of your dissolution and ensure you don’t owe either of the bodies any taxes or penalties.

Once you’re cleared on the taxing front, contact your licensing and regulating authorities to cancel all your licenses such as your federal EIN, your IRS account, etc., for the particular business. (The IRS also specifies other conditions that need to be fulfilled during dissolution. )

Make sure all your taxes and licensing dues are paid off before you distribute the remaining assets amongst the members.

Filing Dissolution Papers

Now that you’ve taken care of all your members, paid off any debts, and canceled all your licenses, you can file the articles of dissolution with the state. As previously discussed, this document is necessary to legally dissolve an LLC in the state records so no authority can hold you accountable to pay any fines or taxes.

This document will be filed with the same state authority that received your article of formation at the time of setting up your business. You might also require a certification from the state’s taxes & licensing authorities to confirm that all dues have been paid.

Other Steps

Apart from the previously stated steps, you might be required to follow some additional steps in some cases. 

In case your business has been registered in other states as well, you’ll be required to follow this procedure as per the guidelines of the state. This means that you’ll have to notify your creditors, cancel your licenses, pay off all taxes and file your dissolution documents with that state. 

It’s mandatory for you to file the last tax returns (income and employment) for your LLC before its dissolution. While filing you must specify that these will be the last tax returns for your LLC. 

We understand that dissolving your business is never an easy decision. However, officially closing your business is a basic requirement if you want to ensure that no penalties and lawsuits come your way. From clear indications to your suppliers and notices to your creditors to complete and error-free filing of documents with the state, you must follow every step to the end. If you’re unable to get a hold of the procedure or cannot invest time in the same, you can appoint professional service providers who can file all necessary documents for you.

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