Key Takeaways

  • To properly dissolve an LLC in Texas, members must first follow the winding-up process outlined in the Texas Business Organizations Code (BOC).
  • An LLC must settle debts, notify creditors, and distribute remaining assets before filing termination documents.
  • The Certificate of Account Status from the Texas Comptroller is required before submitting a Certificate of Termination to the Secretary of State.
  • Dissolution can occur voluntarily by member vote or involuntarily by court order or administrative action.
  • Failing to formally dissolve an LLC can result in ongoing tax liabilities and penalties.

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.

Voluntary vs. Involuntary Dissolution in Texas

When learning how to dissolve an LLC in Texas, it’s important to understand that dissolution can be either voluntary or involuntary.

  • Voluntary Dissolution: Occurs when LLC members decide to end the business. The process is typically outlined in the company’s operating agreement and requires a formal vote or written consent by the members.
  • Involuntary Dissolution: Can occur if the LLC fails to meet certain state obligations—such as filing reports, paying franchise taxes, or complying with the Secretary of State’s requirements. In some cases, a court may order dissolution if there are disputes between members or if it is determined that continuing operations is impractical.

If the LLC is being administratively dissolved by the state, it may later be reinstated by filing the appropriate forms and paying any outstanding fees to the Secretary of State and Comptroller.

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.

Steps to Obtain Tax Clearance from the Texas Comptroller

Before filing termination documents, Texas requires proof that all state taxes are settled. This proof comes in the form of a Certificate of Account Status for Dissolution/Termination issued by the Texas Comptroller of Public Accounts.

To obtain this certificate:

  1. Submit a Request through the Comptroller’s website or visit a field office in person.
  2. Ensure All Franchise Taxes Are Paid. The LLC must have filed all necessary franchise tax reports through its final year.
  3. Wait for Processing. Electronic submissions may take up to 4–6 weeks, while in-person requests are often processed immediately.

This certificate verifies that the business has no outstanding tax obligations and is in good standing with the state. Without it, the Secretary of State will not accept the Certificate of Termination filing.

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.

Post-Dissolution Obligations and Recordkeeping

Once your LLC’s termination is approved, the entity legally ceases to exist, but several post-dissolution steps remain:

  • Maintain Business Records: Texas law recommends keeping tax and business records for at least four years in case of audits or claims.
  • Cancel Permits and Licenses: Notify state and local agencies to cancel sales tax permits, business licenses, or industry-specific registrations.
  • Inform the IRS: File a final federal tax return and check the “final return” box.
  • Notify Stakeholders: Inform clients, employees, and vendors of the dissolution and final settlements.
  • Distribute Remaining Assets: Ensure any leftover funds or property are distributed according to ownership interests stated in the operating agreement.

Completing these tasks helps prevent future liabilities or confusion with creditors and tax authorities.

Reinstating a Texas LLC After Termination

If an LLC was terminated or forfeited by the state for failure to comply with tax or filing requirements, it may be reinstated by correcting the issue. To reinstate:

  1. Obtain a Tax Clearance Certificate showing all franchise taxes are paid.
  2. File a Certificate of Reinstatement with the Secretary of State.
  3. Pay the Required Fees.

Once approved, the reinstated LLC regains its legal rights and powers as if it were never terminated. However, reinstatement does not erase liabilities incurred during the period of termination.

Frequently Asked Questions

1. How much does it cost to dissolve an LLC in Texas?

The Texas Secretary of State charges a $40 filing fee for the Certificate of Termination. Additional costs may apply if you need certified copies or expedited processing.

2. How long does it take to dissolve an LLC in Texas?

If all documents and taxes are in order, dissolution typically takes 3–5 business days. Obtaining the tax clearance certificate can take longer—up to 6 weeks by mail.

3. Do I need a lawyer to dissolve my LLC?

While not required, consulting an attorney ensures compliance with the Texas Business Organizations Code (BOC) and avoids tax or legal issues during the winding-up process.

4. Can a dissolved Texas LLC be reinstated?

Yes. An administratively dissolved LLC can apply for reinstatement by filing a Certificate of Reinstatement and obtaining a Tax Clearance Certificate from the Comptroller.

5. What happens if I don’t officially dissolve my LLC?

The LLC continues to incur franchise taxes and filing obligations until it’s properly terminated. Failure to dissolve can lead to penalties and personal liability for unpaid taxes.

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