How to Dissolve an LLC?

Choosing to dissolve a Limited Liability Company (LLC) does not necessarily reflect a business failure. There are many legitimate reasons to dissolve an LLC that have nothing to do with the success or a business failure. For example, an LLC may be created with a defined timeline, while other LLCs are developed to meet a specific need, and when the need is met, the need for the LLC no longer exists.

Despite the reasons an LLC may need to be dissolved, there are appropriate processes in place to dissolve a Limited Liability Company — or, an LLC. The legal processes required to dissolve an LLC will vary among states; however, the law’s broad brushstrokes are essentially the same. There are three approaches to dissolve an LLC.

Judicial Dissolution

  • Failure of the LLC to pay required fees or taxes.
  • Failure of the LLC to remain compliant with state or federal laws.
  • The result of a lawsuit started by a sullen and disgruntled member of the Limited Liability Company who wants to dismantle their business ties with the rest of the LLCs members.

Administrative Dissolution

  • Failure of the LLC to pay required state fees or taxes.
  • Failure of the LLC to remain compliant with state or federal laws, i.e., filing a mandated annual report, among others.

Voluntary Dissolution

  • LLC members can set up a vote where each member can vote to dissolve the firm. This can happen at any time.
  • The LLC’s operating agreement contains a triggering-clause that can set up the dissolution. An example would be that the LLC would be dissolved upon the death of one of the members.

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How to Dissolve an LLC?

When the Secretary of State approves the Certificate/Articles of Dissolution, technically, the LLC is dissolved in that state. Note, though, when the LLC’s dissolution is approved, the LLC is no longer permitted to engage in new business.

However, there are still additional steps to consider if the Limited Liability Company conducts business in other states. Remember to –

  • File withdrawal/cancellation documents in relevant states. This helps ensure you avoid fines for unfiled annual reports.
  • File a final LLC tax return; be sure to check the box on the IRS form that states — Final Tax Return. The IRS offers guidance on how to close a business appropriately in accordance with its regulations, when applicable.
  • Pay any outstanding, final payroll taxes. The IRS has the authority to obtain restitution from an LLC member or anyone else who is authorized to sign payroll taxes for the LLC.
  • Cancel the FEIN — the LLC’s Federal Employer Identification Number is a protective measure but also alerts the Internal Revenue Service that the LLC is no longer operational and will no longer be filing future taxation paperwork.
  • Close any and all business licenses related to the LLC’s operations.

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Additional Procedures — After the Dissolution’s Approval

Settling Creditor Claims

Distributing Assets

The Take-Away

To avoid a messy legal/financial circumstances (when merely trying to dissolve a business entity), it is prudent to reach out to legal professionals at the Weisblatt Law Firm — with the knowledge and experience to help you dissolve your business legal entity entirely and legally.

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