How to End an LLC: Everything You Need to Know
If you want to end an LLC, you will need to know what steps must be taken in order to successfully dissolve your business. 4 min read
2. Types of LLC Dissolution
3. How to End an LLC
How to End an LLC
If you want to end an LLC, you will need to know what steps must be taken in order to successfully dissolve your business. There are many reasons for shutting down a business, and not all of those reasons are due to the failure to do well. Most businesses have a specific timeline that must be met, knowing that the business will end.
Once you know it’s time to end your LLC, you’ll need to dissolve your business with the Secretary of State by filing some forms. The reason for formally dissolving your entity is so that you can no longer be liable for paying annual fees, paying business taxes, or filing annual reports. It also puts creditors on notice that you will no longer be conducting business through your LLC. Failure to properly dissolve your LLC could mean a lot of fees and penalties if you don’t properly file such forms to dissolve your business.
Types of LLC Dissolution
There are three types of LLC dissolution, and these include judicial dissolution, administrative dissolution, and voluntary dissolution. Judicial dissolution is handed out by the court; a court can dissolve your business for failing to comply with state laws or failing to pay state or federal taxes. However, judicial dissolution can also be brought due to a lawsuit in which members no longer want to work with one another.
The Secretary of State’s office imposes an administrative dissolution on a business for failure to comply with state law or failure to file an annual report. Keep in mind that the Secretary of State in most states has broad powers in terms of dissolving a business. Therefore, there are several reasons as to why a Secretary of State’s office might choose to administratively dissolve an LLC.
The last type of dissolution is voluntary dissolution, which occurs simply because the member(s) choose to close their doors. This type of dissolution can occur if the members, at the time of formation, determined that a certain event automatically terminate the LLC, i.e. death of a member, or if a member casts a vote to dissolve the company.
How to End an LLC
There are certain steps that must be taken in order to dissolve your LLC, and these include:
• Member approval of terminating the LLC
• File the dissolution form with the Secretary of State’s office
• Obtain closure consent from the IRS
• Notify creditors and pay any claims owed to them
• Withdraw the right to transact in other states (if applicable)
Members must approve of the dissolution, and the approval must be followed as it is laid out in the articles of organization or the operating agreement. After the voting has taken place, the appropriate form will need to be filed. Be sure to visit your state’s Secretary of State website in order to find the right form, which is usually called a certificate of dissolution, certificate of cancellation, or the articles of dissolution. The process varies by state. The form will ask for information regarding your LLC, and some states will also ask for information regarding the LLC’s debts, in order to ensure that all of your business’s debts are taken care of prior to filing the document. Other states will also require you input information regarding the distribution of remaining assets after all creditors are paid. Most states also charge a nominal fee for filing the dissolution form.
Some states require that you obtain consent to dissolve by the IRS. Furthermore, some states will not allow you to dissolve your LLC until you’ve paid your last tax return. In order to obtain consent from the IRS, you will need to submit a request for business closure. The IRS website provides a business closing checklist, which will identify the forms required, along with links to state and local rules and regulations for dissolving.
You are also required to notify all creditors by mail that your LLC is being dissolved. As previously noted, some states require that you satisfy this requirement prior to submitting a dissolution form with the Secretary of State. Notifying creditors will allow them to reach out and collect what is currently owed to them.
If you are registered to conduct business in other states, you will also be required to file dissolution forms in those states. This form is referred to as an application of withdrawal, certificate of termination of existence, termination of registration, or a certificate to surrender of right to transact business.
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