Step-by-Step Guide to Dissolving an LLC [& Different Types]

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Closing a business is as complicated as starting a new one! There may be several reasons why you would want to dissolve your LLC. In this article, we will discuss, in detail, how to dissolve an LLC. By the time you’re done reading, you will be informed of all the steps in the dissolution process, and how to go about implementing them.

How to Dissolve An LLC

Once you’ve decided that you no longer want to work and support your LLC, you need to make sure you dissolve it officially. Just like there are steps involved in starting one, there are instructions you need to follow in order to dissolve your LLC. Here is a guide to assist you in the process:

Members of the LLC Need to Vote

If you’re closing your company, chances are that all partners would already have agreed to it. However, you need to get everyone’s consent officially in a written document. Your company’s LLC operating agreement should have the procedure for LLC dissolution, which you need to follow while dissolving an LLC. If you do not have one of these, you should follow your state’s LLC statutes.

File Articles of Dissolution With the Secretary of State

Articles of dissolution is a form that informs the state that your LLC is dissolving. Many states also require a certificate from the state taxing agency validating that you’ve cleared all taxes and debts before you submit the articles of dissolution. The fees of forms, procedures, and certifications may vary from state to state.

Announce Your Company’s Dissolution to Any Creditors

Just like you have to inform official authorities about the dissolution of an LLC, you are also legally obligated to inform all creditors. This helps in clearing any remaining debts and liabilities, ending the business on good terms with others, and placing a claim until the agreed deadline. In many states, you are required to inform creditors before filing paperwork.

File Taxes (State, Federal and Local) And Pay All Other Debt and Obligations

Before dissolving your company, you should also file for the remaining business taxes. These include state, federal, and local taxes. Many states also require a tax clearance certificate to ensure that you’ve paid all dues and debts. This will inform the IRS that your company is dissolving.

Divide Remaining Assets per Percentage

Dissolving an LLC includes dividing the remaining assets amongst the partners. These are assets that remain after all financial obligations like taxes, debts, and other payments are done. Assets are distributed by the percentage contributed by each partner during the LLC’s formation. This is one of the last financial obligations that need to be fulfilled before closing down your company.

DID YOU KNOW? A registered agent can help you through the process of closing down your LLC by handling all legal obligations.

Key Takeaways

There are certain steps to dissolve an LLC that people must follow in order to officially close down their business.
After all, partners have officially voted, the LLC owner needs to file articles of dissolution and announce to all creditors that they are ending their business.
The next step after this involves filing any remaining taxes. They must also inform the IRS about the decision.
Lastly, any remaining assets are divided by the shares contributed by partners during the LLC’s formation.

Types of LLC Dissolution

Now that we have gone through the procedures required, let’s go through the different types of dissolutions.

Judicial Dissolution

Judicial dissolution is handed out by the court for either failing to pay taxes, not filing annual reports, or not following state laws. These can also take place when an LLC has been served with a lawsuit, or if the LLC members no longer wish to work with one another.

Administrative Dissolution

An administrative dissolution takes place when the Secretary of State requires the dissolution to take place. This can happen, like judicial dissolutions, when an LLC failed to submit an annual report, pay annual fees, or did not follow state laws.

Voluntary Dissolution

The dissolution of a Limited Liability Company occurs when the members decide to dissolve the company themselves. As the name suggests, it is voluntary and undertaken by the LLC members exclusively. These dissolutions involve submitting various legal withdrawal documents like application of withdrawal, termination of registration, and/or dissolution papers.

DID YOU KNOW? If needed, you can use an LLC service to guide you through the process of dissolution. This will ensure you close the company by fulfilling all your legal obligations.

Conclusion

Learning about LLC Dissolution is simple if you follow certain steps. These include getting the consent of all the partners in writing, paying any remaining debts and taxes, and informing authorities about the decision. After these tasks are completed, the remaining assets can be divided amongst the partners. There are mainly three types of dissolution: judicial, administrative, and voluntary.

FAQ

What happens if you don’t dissolve an LLC?

There are certain fees, taxes, and payments you have to pay when you run a company. If you don’t dissolve the company, you’ll be financially obliged to keep making these payments, which can put an unnecessary burden on your finances.

Dissolution of an LLC that was never used?

This process is the same as dissolving a company that was in business! You need to inform the proper authorities, get various documents together like a certificate of cancelation, and pay any remaining debt.

Dissolving an LLC with the IRS?

In order to dissolve an LLC with the IRS, you need to file any remaining taxes you owe, as well as fill out forms to submit a certificate of dissolution. This will help solidify that your company paid all its debts.

What happens when you dissolve an LLC?

After the date of dissolution of the LLC, you’re free from all legal and financial obligations related to the company. You’re free to pursue other career options!

Is it hard to dissolve an LLC?

It shouldn’t be! If you follow all the steps of how to dissolve an LLC, then it should be a simple process. Just remember to inform authorities and pay your remaining dues and you should be set.

ABOUT AUTHOR

I’m an entrepreneur by profession and an artist by passion. I do business to pay the bills and make music to bring the thrills. Thanks to a bachelor in Business Administration, I'm well-versed in all things business. Owning a construction company certainly helps, too, but it also brings out my love for building and home protection.

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