Key Takeaways

  • Dissolving an LLC in Tennessee involves multiple steps including consent from members, filing forms, settling taxes, and closing accounts.
  • You must obtain tax clearance from the Tennessee Department of Revenue before submitting Articles of Termination.
  • The process differs slightly if you dissolve voluntarily vs. administratively or judicially.
  • Notify creditors and close business accounts after dissolution.
  • Maintain records and resolve all liabilities before winding up the business.
  • Filing final federal and state tax returns is essential to avoid penalties.

If you need to know how to close a business in TN, the following steps will guide you through the process, which will vary depending on whether your business is a sole proprietorship, partnership, corporation, or LLC.

How to Close a Sole Proprietorship

  1. End all business operations. If you have a brick-and-mortar location, choose a date to close the doors to all customers. Let employees know the business will be closing.
  2. Disburse final paychecks to employees. File the last necessary tax forms, such as income tax returns and federal unemployment. Distribute final withholding and wage information to Form W-2 employees, and report Form W-3 withholding information to the IRS.
  3. Pay all outstanding debts. Give notice to lenders that your business will be closing. Develop a plan to settle all accounts. If you must, sell business assets to generate extra funds to pay off debt. As a sole proprietor, you are personally responsible for all business debt, so be sure to pay them in full. Afterward, close your business accounts.
  4. Cancel any occupational or professional licenses. Contact the state agency in charge of occupational regulations and file any necessary paperwork to revoke your license.
  5. Cancel local and state business permits. To void your business permit, get in touch with the County Clerk.
  6. Close any tax accounts that you may have opened. You can call the Tennessee Department of Revenue to close your state account. Close your EIN account by writing a request to the IRS. Include your number and your reason for closing the account.
  7. If you have registered a fictitious business name, cancel it by visiting the Tennessee Department of State website, downloading the Application for Cancellation of Assumed Name, and submitting the completed form with the required fee.
  8. Keep financial records. Even after your business has dissolved, the IRS and the state may still audit your records for three to seven years.

How to Close a Corporation in Tennessee

Closing (dissolving) a corporation in Tennessee is one step in a larger process known as the "Winding Up" process. The Secretary of State can approve Corporation Dissolution, but there are things you must do both before and after the actual dissolution.

Before the dissolution:

  1. Have a board of directors' meeting. Create a resolution to dissolve the corporation.
  2. Have a shareholders' meeting in order to approve the motion to dissolve the corporation.
  3. Submit a written Consent to Dissolution to the Tennessee Secretary of State.
  4. Submit any required annual reports to the Tennessee Secretary of State.
  5. Pay off any outstanding business debts.
  6. Pay any outstanding taxes and administrative fees.

After the corporation has been formally dissolved:

  1. Distribute any remaining assets.
  2. Close all corporate bank accounts.
  3. Cancel all city, county, state, and regional business licenses and permits.
  4. Submit IRS Form 966.
  5. Cancel the IRS account connected to the corporation's EIN.

The Tennessee Secretary of State does not legally require the Notice of Dissolution of a Tennessee Corporation. However, the publication is a way to notify any party that may have a claim against the corporation. If someone makes a claim later on, evidence of publication might be useful in proving that the corporation had been dissolved.

How to Close an LLC in Tennessee

In order for owners to formally dissolve an existing LLC, Articles of Termination must be submitted to the Tennessee Secretary of State. If the LLC is naturally terminated after a specified period of time, as a result of LLC documents, if there are no owners lefts, or if by consent of its owners, a Notice of Dissolution is required to be submitted to the Tennessee Secretary of State.

Include any documents that show any action related to this decision. Make sure to file a final tax return with the Tennessee Department of Revenue. From this Department, you'll receive a tax clearance letter that you'll need to submit with the other necessary documents.

Once the business is legally terminated with the State of Tennessee, the company must stop conducting business and wind up its remaining obligations. Winding up includes collecting and paying off debts, selling assets, and distributing any remaining money to the members of the LLC.

Recordkeeping and Post-Dissolution Obligations

Even after dissolving, Tennessee LLCs must maintain certain responsibilities:

  • Maintain Records: Retain tax documents, contracts, and legal records for at least 3–7 years.
  • Notify Stakeholders: Inform vendors, service providers, clients, and lessors of your business closure.
  • Update Registered Agent: If you are not dissolving right away, update your registered agent to avoid missing important notices.
  • Monitor for Claims: Creditors may still file claims post-dissolution. Publishing a Notice of Dissolution can limit the window for such claims.

If you’re unsure about any of these steps, an experienced attorney from UpCounsel can guide you through how to dissolve an LLC in Tennessee.

Voluntary vs. Involuntary Dissolution

Understanding the type of dissolution is important for compliance and liability protection:

  • Voluntary Dissolution: Initiated by the LLC’s members per the operating agreement or state law. Requires Articles of Termination and tax clearance.
  • Administrative Dissolution: The Secretary of State may dissolve an LLC for failing to file annual reports or pay fees.
  • Judicial Dissolution: Can occur through court order, typically when internal disputes make it impossible to operate.

For administrative or judicial dissolutions, reinstating your LLC may be possible but requires addressing all compliance issues.

Notify Tax Agencies and File Final Returns

It’s essential to close all tax accounts and file final returns to prevent penalties:

  • State Taxes: File your final business tax return with the Tennessee Department of Revenue. Use the “Close Business Account” option on the TNTAP portal or file a Request for Tax Clearance.
  • Sales Tax and Franchise & Excise Tax: Ensure these are fully reported and paid. Tennessee may not approve your dissolution without full compliance.
  • Federal Taxes: File your final IRS tax return and check the box indicating it’s the final return. Submit IRS Form 966 if applicable.
  • Cancel EIN: Send a letter to the IRS requesting closure of your EIN account once the final return is processed.

Winding Up: What It Involves in Tennessee

Winding up an LLC means completing all final business activities before the entity ceases to exist. Tennessee requires LLCs to:

  • Notify Creditors and Settle Debts: Send formal notice to known creditors, allowing them time to make claims.
  • Collect Outstanding Receivables: Make efforts to collect any money owed to the business before closing accounts.
  • Distribute Remaining Assets: Once debts are settled, distribute any remaining assets to members in accordance with the operating agreement or state law.
  • Cancel Licenses and Permits: Contact the appropriate city or county departments to cancel business licenses, permits, and registrations.
  • Close Business Bank Accounts: After final payments and distributions, officially close all business bank and credit accounts to prevent misuse.

Steps to File Articles of Termination in Tennessee

To officially dissolve your LLC, file the Articles of Termination with the Tennessee Secretary of State. Here’s how:

  1. Obtain a Tax Clearance Letter: Before submitting your termination documents, you must obtain a tax clearance letter from the Tennessee Department of Revenue confirming that all taxes have been paid.
  2. File Form SS-4249: This is the official Articles of Termination form. You can file online through the Tennessee Secretary of State website or by mail.
  3. Include Required Information:
    • LLC name
    • Reason for dissolution
    • Confirmation of winding up
    • Tax clearance confirmation
  4. Pay the Filing Fee: As of now, the fee to file Articles of Termination in Tennessee is $20 (subject to change).
  5. Processing Time: Online filings are typically processed within 1-2 business days, while mailed forms may take several days longer.

Pre-Dissolution Requirements for Tennessee LLCs

Before filing to dissolve your LLC in Tennessee, it's critical to meet several legal and financial prerequisites:

  • LLC Member Approval: Review your LLC's operating agreement to determine the voting threshold required to approve dissolution. Most LLCs require majority member consent.
  • Review Governing Documents: The operating agreement or articles of organization may include specific provisions on how to dissolve the LLC.
  • Resolve Legal Disputes: Ensure any pending lawsuits or internal member disputes are resolved, as these can delay the dissolution process.
  • Notify Employees and Contractors: Provide adequate notice in compliance with employment laws, and issue final paychecks and W-2s or 1099s as required.

Frequently Asked Questions

  1. Do I need a tax clearance to dissolve my Tennessee LLC?
    Yes. Tennessee requires a tax clearance letter from the Department of Revenue before the Secretary of State will accept Articles of Termination.
  2. How much does it cost to dissolve an LLC in Tennessee?
    The filing fee for Articles of Termination is currently $20. Additional costs may include resolving outstanding taxes or legal obligations.
  3. Can I dissolve my LLC online in Tennessee?
    Yes. You can file the Articles of Termination through the Tennessee Secretary of State’s online filing system.
  4. What happens if I don't properly dissolve my LLC?
    You may continue to incur annual fees and be subject to legal and tax obligations, including penalties for late filings or unpaid taxes.
  5. How long does it take to dissolve an LLC in Tennessee?
    Online filings are usually processed within 1-2 business days. Mailed forms may take up to a week or more.

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