LLC Dissolution Form: Everything You Need to Know
An LLC dissolution form is filed by a Limited Liability Company when its members wish to dissolve the company and no longer conduct business. 4 min read
What Is an LLC Dissolution Form?
LLC dissolution forms must be filled out by the members (business owners) of an LLC in order to officially dissolve a business. The process of dissolution can differ slightly depending on the state in which the LLC is formed and registered, but the Secretary of State (SOS) website will have information regarding how to properly shut down a business.
The state may require a filing or service fee along with the LLC dissolution form when it is filed.
Check to be sure that the status of your LLC is active in the SOS business search database. An LLC cannot be dissolved if it is not active in some states.
To check the status of any LLC, head to the SOS website and find the business name search tool. Some websites will direct to another database, separate from the Secretary of State.
Some states also require the members of an LLC to file some type of cancelation certificate when they dissolve their business. The state of California requires the members to file Form LLC-4/7.
Before mailing in the forms required in your specific state for cancelation, you'll want to get some legal advice to be sure that the dissolution is being handled properly. This will help to ensure that the liability protection offered by the LLC structure remains intact, even as the company is dissolved. You'll also want to mail any dissolution forms using Certified Mail and request a return receipt to keep track of the forms and be certain that they were received.
Nonprofit organizations and cooperative association entities should not use a dissolution form, but will be required to follow their own set of rules for closing their companies.
How to Dissolve an LLC
If the owners of an LLC decide to dissolve the business, they will need to make sure they complete a few tasks first:
- Conduct a meeting with all of the members of the LLC (or a Board of Directors if the LLC has chosen a corporation structure) and put forth a vote on the dissolution of the business.
- The decision to dissolve must be approved by a majority of the members or shareholders (depending on the business's structure).
- The members need to draft a written agreement and have it signed by all members showing the agreement to dissolve the business.
- Finally, a dissolution form may be filed with the state.
The final tax returns for the company must also be filed before an LLC can submit a dissolution form. LLCs must file their business taxes (which will depend on their taxation status chosen with the IRS (Internal Revenue Service), employment taxes, and must pay any owed taxes before dissolving.
Even if the business plans to dissolve in the middle of a year, the taxes for that year must be reported and filed. When the last tax returns are filed for the company, the member or members handling the reports should be sure to specify that these are the final returns for the company.
An LLC dissolution form will be filed with the Secretary of State for the state that the business is registered with, but the LLC should be sure that a few important documents are in order before filing:
- A written document indicating the consent of dissolution by the members of the LLC
- Status of good standing with the Franchise Tax Board verification letter (this shows that the LLC is caught up with all owed taxes)
- Tax clearance certificate (also verifies that all company taxes are squared away)
The members of the LLC will also want to make sure that any licenses or permits originally obtained by the LLC in order to properly conduct business have been canceled. Insurance coverages for the business will also need to be canceled and might include:
- Business liability insurance
- Worker's compensation insurance
- Employee health care policies
Any DBAs (Doing Business As) or trade names filed for the LLC should also be canceled once the business is dissolved.
Before filing for dissolution, the owners of the company will want to make sure they have notified any person who may be affected by the action including:
- Service providers (phone companies, etc.)
Making sure to tie up any and all loose ends when dissolving an LLC will help to maintain a good reputation and avoid any legal or liability issues down the road.
If you need help with an LLC dissolution form, 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, Stripe, and Twilio.