Deciding to close an LLC company can be one of the most complex business choices. Once you have decided to end your LLC, you must be aware of all the steps to minimize your liability.
The process of dissolving a limited liability company starts with the owners or members of the LLC notifying the government agencies about the closure. Then, the members should wind up the operations, settle debts and distribute the remaining funds to the owners. The process of dissolving an LLC depends upon various factors like the state laws, the nature of the business and the operating agreement, etc. In the absence of a contract, the LLC will be dissolved by following the default rules mentioned in the state’s statutes. Since the process of dissolving an LLC can become complex, one should hire a corporate tax attorney to handle the matter.
In this blog, we will look deeper into the process of dissolving an LLC.
Voting to dissolve the LLC:
The first step towards dissolving an LLC is voting to terminate the company. If you wish to dissolve the company, you should review the company’s operating agreement. The agreement will help you know if a unanimous vote is required to dissolve the LLC. You must keep a record of the vote with a written consent form signed and dated by the owners.
Notify the employees and settle debts
Once you are confident that the LLC is dissolving, you should notify the employees and pay their final wages. The next step is contacting the creditors, including the bank, property manager, vendors, etc. You must pay all the outstanding debts to the creditors and notify the creditors about the decision to dissolve the LLC. Under state law, the creditors have 90 to 180 days from the LLC dissolution notification date to submit credit claims.
File for Dissolution
The owner is required to file paperwork to dissolve the LLC where the company was registered. In some states, the paperwork is called Articles of Dissolution. Some states charge for filing the dissolution while others don’t.
Failing to file dissolution documents will make your company legally operational. The company will be liable for taxes. The LLC will have first pay the accumulated taxes and fees before they can distribute the remaining assets to the owners. In some states, the LLC owner may be required to get clearance from tax authorities and agencies before filing the dissolution paperwork. Since every state has its own rule for filing dissolution paperwork, one should consult an income tax attorney specializing in handling corporate taxes.
Cancel business license and work permits
Once you have submitted the dissolution paperwork, you will be required to cancel your business permit and licenses. This is done to ensure no one misuses your business permit and license, and the business is not liable for any further fees and penalties.
Once all the outstanding debt has been paid, you can distribute the LLC members’ remaining assets. Business assets include everything owned by the business like personal property, investments, cash, etc.