How to Close an LLC: Everything You Need to Know
How to close an LLC is a topic that many limited liability company owners who are thinking about retirement want to learn more about. 3 min read
2. How to Close an LLC
Closing an LLC Overview
How to close an LLC is a topic that many limited liability company owners who are thinking about retirement want to learn more about. An LLC is treated as a registered citizen by law. The LLC is registered with the state where the articles of organization were filed.
To close an LLC, the members need to surrender the authority of the company to do business. They can do this by sending a complete Articles of Dissolution to the secretary of state. However, filing these dissolution papers is one part of closing a limited liability company.
The owners of the LLC should check out the statute of the state pertaining to limited liability companies. The members should follow the law's provisions to close down the company and to avoid facing personal liability for any lawsuits and debts that may arise.
If you don't dissolve a limited liability company properly, you could face personal liability for the following:
- Unpaid taxes
- Unpaid debts
In many states, limited liability companies are required to pay a fee. If you don't dissolve the company properly, you could be required to pay this fee every year. Other states only charge a fee if the limited liability company is open and doesn't file a tax return. Therefore, if you don't close the LLC properly and don't file a tax return, you could face a fee.
If you own property in the name of the limited liability company, you will not receive the property back until the limited liability company is dissolved properly.
It is essential that you complete a formal LLC dissolution to give up the company name and to close the permits. That way, no one will be able to use the company name or permits. If you leave the limited liability company active and neglect to monitor it, someone else could use the LLC and put you in legal trouble.
How to Close an LLC
The first step in closing an LLC is a vote. You should hold a meeting with all the owners of the LLC and have a vote to dissolve the LLC officially. Different states have different requirements when it comes to the vote. In some states, the limited liability company may need a majority or two-thirds vote to close. Other states require a unanimous written agreement to close the LLC. Therefore, it is essential that you check the LLC rules in your state.
There are many closing procedures included in the operating agreement of the limited liability company. Therefore, you should also check the operating agreement.
The Articles of Dissolution are filed with the same agency that accepted the documents for the formation of the LLC. In most states, the secretary of state will file the Articles of Dissolution to close the LLC.
Fees, forms, and filing procedures differ from state to state. In certain states, the limited liability company needs to get a certificate from the state taxing agency. The purpose of the certificate is to confirm that the limited liability company is current when it comes to its state taxes. The certificate must also be sent to the secretary of state along with the dissolution papers.
The next step is checking the website of the secretary of state for a form that indicates that the owners are closing the LLC. Follow the instructions on the website for completing the form and filing it with the secretary of state. The purpose of the filing is to close the name of the limited liability company.
The third step is notifying any creditors of the dissolution of the LLC. Once the owners have officially decided to close the company, the limited liability company needs to notify all creditors that the business will soon be dissolved. That way, the creditors will know the time frame in which they can file a lawsuit against the company. Usually, the time frame is three to five years within the dissolution of the business.
Different states have different requirements when it comes to an official notice. You should check the rules of your state to determine how much you notice you need to give and whether you need to publish the official notice in a newspaper.
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