How To Close An LLC In Texas: Everything You Need to Know
When asking, “How close an LLC in Texas,” you need to know that Texas does not have a formal statute explicitly governing LLCs. 3 min read
How to Close an LLC in Texas
When asking, “How close an LLC in Texas,” you need to know that Texas does not have a formal statute explicitly governing LLCs. The law that regulates the state’s LLCs is the Texas Business Organization Code (BOC). The BOC also regulates the state’s corporations, partnerships, and non-profits.
Because there is no specific law on how to close LLCs in Texas, you should consult an attorney who has prior experience with business law.
How to Begin Winding Up the LLC
Assuming the decision to close an LLC is voluntary and not court-ordered or forced by the state, when the LLC’s owners decide they do not want the business to exist anymore, they must start the process of “winding up” the company. Texas law does not allow the LLCs owners to merely stop operating as a business without going through any formal procedures. In order to officially start the winding up process, the owners need to set in motion a series of final tasks.
In the majority of states, the LLC Act lays out the action that must occur directly before the winding up process starts. The first step of winding up is called “dissolution” and typically involves the LLCs owners taking a formal vote for winding up the company.
However, in Texas, because the state does not have an LLC Act, the BOC is what governs the winding up process. It does not mention dissolution, and instead makes reference to a number of possible actions that would require the LLC to wind up.
When owners form an LLC, they also create an operating agreement. Texas’s BOC indicates that you should first look to the LLC’s operating agreement to see if it sets forth the procedures for how to “dissolve” the business or wind up the company. A typical procedure set forth in the operating agreement is to have a formal vote with a certain number or percentage of owners voting in favor of the resolution to start winding up the company.
What Are the Next Steps for Closing the LLC?
According to Texas state law, once the owners of the LLC take the formal steps to start winding up the business, the next step is to stop conducting any type of business transactions, with the exception of what is necessary to continue winding up the business.
The Texas BOC indicates certain responsibilities for closing the LLC, including:
- Sending a written notice to all of the LLC’s claimants
- Selling the company’s property that isn’t designated to return to the owners
- Closing the loop on any lawsuits
- Anything else that is required to wind up the business
Texas law also requires the LLC’s owners to obtain a tax clearance in the form of a Certificate of Account Status. This certificate can be obtained through the Comptroller of Public Accounts and will certify that all of the LLC’s taxes have been paid and that the business is in good standing. This is a prerequisite to dissolving the company.
The certificate generally takes four to six weeks if submitted electronically, whereas if the owners physically go to a field office, they can usually walk out with the certificate that same day. Once the LLC obtains the Certificate of Account Status, the owners must attach it to the Certificate of Termination.
A Certificate of Termination must be filed with the Texas Secretary of State. The termination certificate must include:
- The name of the LLC
- The name(s) and address(es) of the LLC’s member(s)
- The LLC’s file number
- The action that was taken to wind up the business (i.e., a formal vote by the LLC’s owners)
- A statement that the LLC has complied with all necessary procedures for winding up the business
To file the Certificate of Termination, the state requires a one-time $40 filing fee. It can be filed electronically or in person. This certificate is typically processed within three to five business days.
What to Expect After You File A Certificate of Termination
Once the Secretary of State has processed the LLC’s Certificate of Termination, the LLC will cease to exist. The previous name will now become available for another business to use.
If you need help closing an LLC in Texas, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.