LLC Dissolution Ny: Everything You Need to Know
LLC dissolution NY, or limited liability dissolution in New York, is the process of bringing an end to your LLC in New York. Doing so can be complex, with many steps necessary before your LLC is officially shuttered.4 min read
LLC dissolution NY, or limited liability dissolution in New York, is the process of bringing an end to your LLC in New York. Doing so can be complex, with many steps necessary before your LLC is officially shuttered.
Nonetheless, whether you are bringing an end to your LLC because of hard times, retirement, or the pursuit of new interests, you cannot avoid this process by just walking away. Potential claims, unexpected penalties, and other disputes could arise if you do, so it’s important to follow the proper steps when dissolving your LLC.
Rules for Dissolving an LLC in New York
When dissolving a New York LLC, you should turn to your LLC’s operating agreement for guidance. If correctly drawn, it should set out rules for dissolution. Usually these rules will call for a vote of LLC members regarding dissolution, with a certain percentage required to be in favor of dissolution for it to occur.
Alternatively, unless there is a specific provision against it in your operating agreement, New York’s LLC Act allows for a majority vote of written consent to dissolve the LLC.
Regardless of what method you use to dissolve your LLC, this decision should be recorded in the dissolution meeting’s minutes or on the written consent form.
If an NY LLC does not have an operating agreement, dissolution falls under New York’s LLC law, which calls for dissolution through majority vote or written consent in favor of dissolution. Once this happens, the voluntary dissolution processes may occur.
Articles of Dissolution
After a vote in favor of dissolution, Articles of Dissolution must be submitted to the New York Department of State, in addition to a $60 filing fee. This must be done within 90 days of the vote. Such submitted articles should contain:
- The LLC’s current name.
- The LLC’s original name, if it was changed.
- The date of filing for the Articles of Organization.
- The event that created the Articles of Dissolution (vote, written consent, or other).
The purpose of Articles of Dissolution is to give the LLC and their former owners more legal protection from obligations or debts that could arise after dissolution. Once the articles are filed, at least two weeks should be allowed to receive consent for dissolution from the Department of State. If there are franchise tax issues that need resolution, the tax department could take more time.
Simply voting for dissolution and submitting the paperwork are not the only actions necessary to close an LLC. Certain final tasks, collectively known as “winding up,” must be completed. These tasks include:
- Notifying all relevant parties, including:
- Employees. With notification should come payment of any final wages or benefits. The timeframe for this varies for the size of the company.
- Lenders, creditors, vendors, suppliers, and service providers. During notification outstanding payments or an appropriate settlement schedule should be agreed upon, if necessary.
- Other third parties. If your company has a business relationship with anyone else, like insurance carriers or landlords, they should be notified and final arrangements should be made.
- Defending and prosecuting any administrative, criminal, and civil lawsuits.
- Settling all claims helps determine what assets remain for distribution to owners.
- If any outstanding receivables exist, these should be collected.
- If dissolution occurs before claims are collected, the former owners will face greater difficulty in validating debtors’ claims against a company that does not exist.
Closing and settling the LLC’s business.
- Any business bank accounts should be closed and any business credit cards should be cancelled.
- Any business permits, licenses, and assumed names should be cancelled.
- Any states in which the company registers as a foreign LLC should be withdrawn from.
- Disposing and conveying of the LLC’s property.
- Any remaining property should be distributed in accordance with New York law.
- This could include liquidation sales or auctions to disperse and raise money from the property.
- Any LLC property or profits from that property should first be used to pay off creditors or other financial obligations. Failure to do so could lead to legal action.
- Discharging any of the LLC’s liabilities.
- This includes payment to any creditors and payment of outstanding taxes.
- This should be done before any assets are distributed to LLC members.
- An LLC cannot dissolve until it has settled its state taxes.
- Distributing remaining assets, if any, to LLC members.
- Distributions should be made to former and current LLC members upon their withdrawal from the company.
- Distributions should be made of any member contributions not previously returned.
- Distributions should be made in proportion to each member’s interest in the company.
- The exception to the above is if your operating agreement states otherwise.
These and other final tasks should be designated to one or more LLC managers or members for completion.
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