How to Close a Business in Maryland
To close a business in Maryland requires knowledge of the correct processes and procedures, such as dissolving and winding up of a business.3 min read
To close a business in Maryland requires knowledge of the correct processes and procedures, such as tasks that are referred to as dissolving and winding up of a business. Individuals who wish to stop conducting business through their LLCs should officially dissolve it. If this is not done in good time, it may result in legal issues, penalties, and tax liabilities.
The Dissolution Process
To officially de-register an LLC that was registered in the state of Maryland, and thus put it out of the reach of creditors, a process called dissolution is required. This process involves informing the MD Department of Assessments and Taxation (SDAT) that you want to close your business. Once the Maryland Secretary of State verifies that all obligations to the state have been fulfilled, it gives the SDAT the go-ahead to approve the closure of your business.
Requirements for Dissolution
Corporations in Maryland must file personal property reports with the proper authorities before approval of dissolution can be given. If your business has been forfeited, you must file for reinstatement and submit the personal property reports before your company can be dissolved by Maryland's SDAT.
Once a corporation is registered with the MD SDAT, the corporation becomes responsible for any and all recurring obligations with the department. If the corporation does not pay its taxes or file the proper taxes, it becomes liable for additional fees and penalties.
If you want to dissolve your corporation, a thorough look at its formation documents (i.e., the operating agreement and the articles of organization) should reveal the steps and rules required to do so. In most cases, the rules of operation will require a vote by the members of the LLC on a motion of dissolution. The operating document should also indicate the percentage of votes required for a successful motion. To avoid legal issues or unnecessary delays, it's best to follow all the steps and procedures for dissolution outlined in the document. This could entail giving advance notice to all members before the meeting.
If required, Maryland's LLC Act also offers an alternative method for dissolution of corporations that are registered in the state. It simply requires that the business owner obtains unanimous consent for dissolution from all members of the LLC. For corporations with a board of directors, the board must adopt the motion for dissolution before it can be instigated.
Recording the Resolution of Dissolution
Whether the LLC is dissolved by unanimous consent of its members or through the rules stated in its operating agreement or articles of organization, the approval of the dissolution must be recorded either on a written consent form or the official minutes of the meeting where the resolution was adopted.
If a Maryland corporation has issued shares of stock to stakeholders, then a shareholder meeting must be held and the motion for dissolution presented. Regulations require that a majority of shareholders must approve the dissolution plan before it can be carried out, and this must be indicated in the minutes of the shareholders' meeting.
If no shares were issued by the corporation, then the process becomes much easier. Businesses are required to file an article of cancellation with Maryland SDAT in person, by fax, or by mail.
The LLC Act requires that an article of cancellation contains the following information
- The name of the LLC.
- The dates when the company's article of organization was filed (as well as the dates for any amendments).
- The date of dissolution.
- Other information which members may decide to include.
If all the documents necessary for filing an article of cancellation are sent by fax to the SDAT, the process is automatically expedited. However, you need to include your credit or debit card information along with your request. If the documents are sent by mail, ensure that you include a check that covers all fees. When you present the files in person, you can pay the fee for expedited processing either with cash, money order, or check.
The LLC Act allows individuals to revoke the dissolution of their LLC's if they want to continue transacting business after filing the article of dissolution. However, this is only possible if they are yet to file the certificate of cancellation.
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