Cancelling An LLC: Everything You Need to Know
Canceling an LLC must involve a unanimous vote from ownership unless your original LLC Operating Agreement states that with a specific percentage of LLC members a cancellation can occur.3 min read
2. Why Should You Dissolve an LLC?
3. Franchise Tax Fees
4. Handling Business Bank Accounts
5. Voting to Close an LLC
6. Notifying Creditors of Your LLC Dissolution
7. Notifying Taxing and Licensing Authorities
8. Steps to File a Certificate of Cancellation
9. File the Certificate of Cancellation
Available Options for Canceling an LLC
Why Should You Dissolve an LLC?
In the event that your LLC needs to close for business, you do not want to just shut your business down but will need to dissolve the LLC to stop required state fees, annual reporting, and minimum taxes from being necessary. Even if you have not done business during the year, you may still be required to report and pay fees if you fail to dissolve your LLC.
Upon dissolution of the LLC, you will be required to file a final tax return as well as any final employment returns. During your dissolution, the IRS can provide you with a checklist of tax-related steps that will need to be taken when the LLC is dissolved.
Dissolution of an LLC will also notify creditors that your business can no longer accept any debts. This will also prevent owners from a fee, fine, or lawsuit for an unpaid debt that may come about form debtors not knowing the company has dissolved.
Franchise Tax Fees
When dissolving an LLC, you may be required to pay any outstanding franchise taxes or fees that are required by your state since the franchise tax is not considered an annual fee you may still have to pay on it during a dissolution. Even if your company has made no money during the year, an annual franchise tax as well as back taxes, interest, and penalties will need to be paid before the LLC can be canceled. Since the franchise tax is not prorated, you will have to pay the full fee for the year.
Handling Business Bank Accounts
While it is most common to close all business banking accounts before officially filing a Certificate of Cancellation, it is important to make sure you have a way to pay the fees that will be required to close the LLC.
Voting to Close an LLC
All members of an LLC must vote unanimously to close an LLC and if your Operation Agreement has set forth a specific procedure it should be followed along with any state statutes. Upon the completion of the vote, the resolution should be added to your LLCs official records.
Notifying Creditors of Your LLC Dissolution
One of the important steps in canceling your LLC is notifying your debtors. There are many things to consider when notifying creditors of your dissolution.
- They should be made aware of how to submit claims and be given a deadline.
- Though deadlines can range from 90 to 180 days your state will have statues that will determine deadline times.
- You should notify your creditors before you file the cancellation papers.
- Notifying your creditors early can help you take care of debts before the cancellation occurs.
Notifying Taxing and Licensing Authorities
Before cancelation, you should contact state and local taxing authorities to arrange settling of any taxes owed. You will then need to contact any licensing agency where you hold licenses, notify them of the cancellation, and pay any fees that are outstanding. After financial obligations have been taken care of, the remaining assets can be distributed to members.
Steps to File a Certificate of Cancellation
There are several step involved in filing a certificate of cancellation. You will need to:
- File any necessary forms with the secretary of state Corporations Division.
- You must file articles of dissolution.
- A member will need to sign a Certificate of Cancellation.
- You will need to pay the cancellation fee on any outstanding Franchise Tax Fee.
File the Certificate of Cancellation
When filing your Certificate of Cancellation you will need to make sure to include a few items such as:
- A cover letter with the business name and LLC number.
- You will want to include your name, address, and telephone number.
- Any state filing fees.
When mailing be sure to send your forms by certified mail and request a return receipt. While they will send you back a certificate of dissolution, knowing when the papers were delivered is important for your records.
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