Closing your limited liability company (LLC) can be an emotional and stressful time. You have a lot to get done, and properly dissolving your LLC in the state(s) where it is registered and formalizing a "dissolution agreement" between the owners of the LLC are among the most important.
Dissolving your LLC properly is a critical step to ensure you do not become personally liable for the debts or liabilities of the LLC. If you do not follow all the proper steps to dissolving a LLC, you run the risk of incurring significant tax and other penalties, even when you had no income and no tax due! For example, did you know that for each month or portion of a month your IRS federal tax return is late, you are penalized $195, for a maximum of 12 months multiplied by the number of managing members?
And, if you don’t have a “dissolution agreement” in place between you and the other owners (or members) of the LLC, you run the risk of a former partner doing something to create personal liability for you, or later file a lawsuit against you claiming you harmed them or the LLC.
Steps to Dissolve an LLC
Dissolving a LLC is not complicated, but there are a number of critical steps that MUST be followed:
Follow the Operating Agreement (or the law) to wind-down the LLC (i.e. distribute assets and pay off liabilities).
Negotiate, finalize and execute a Dissolution Agreement with your partners.
Properly notify the IRS (within 30 days) using Form 966.
Send Articles of Dissolution to the proper legal authorities (i.e. domestic state and any foreign states).
Submit final taxes.
When Should You Start the Dissolution Process?
Technically, you should initiate the dissolution process immediately after the owners, members, or managers have decided to close or dissolve the company. You definitely don’t want to wait too long, especially if you’re approaching year’s end (to avoid having to submit next year’s taxes) or if you have disputes or debates among the owners.
What is needed to Dissolve an LLC?
To properly dissolve a LLC, you need to follow the requirements in the Operating Agreement. If there is no Operating Agreement, then you need to default to what the law is in the domestic state where the LLC is filed. These requirements usually deal with voting percentages for the owners, properly distributing assets, and paying off liabilities.
After handling the formalities of a proper wind-down of a LLC, then you need to file paperwork with the state(s) where registered, with the IRS and to put a dissolution agreement together with all the owners. Specific paperwork includes (but is not necessarily limited to):
Dissolution Resolution by the LLC
Articles of Dissolution
IRS Form 966
Dissolution Agreement
The Law 4 Small Business service/ filing fee is $199 + state fees.
Some additional options/ services include:
Standard options for all states:
Partnership Separation Agreement – (+$199)
Newspaper Notice to Creditors – (+$125)
Dissolution Checklist – (+$29)
Template Notice to Creditors – (+$199)
Rush Service – (+$175)
No. This is not true, and dangerous.
If your current LLC has existing debts, when you dissolve your LLC, the very entity that is shielding you from personal liability disappears — thereby transferring those debts to you personally.
If you are trying to cancel debts and other obligations of your LLC, do not simply dissolve your LLC. Instead, consult with a bankruptcy attorney to understand your options and the implications.
No. Dissolving your LLC simply renders the LLC inactive with the appropriate state agency (i.e. Secretary of State). Annual fees and dues will no longer accrue with that agency, but you will still need to file your final taxes as appropriate, and/or issue a notice of termination with the appropriate state agency.
This service does not help you with the state agency to terminate tax obligations.
Probably not. In most cases, the state will require you to pay up what you owe, before permitting you to dissolve the entity.
Actually, we strongly encourage you to keep your Registered Agent in place, after you dissolve your LLC — for up to the statute of limitations of contracts (typically 6 years).
The reason is, if you dissolve your LLC and cancel your Registered Agent, you may miss important legal notices sent to the company after dissolution. This risks a default judgement, even after the company has been dissolved.
If this happens, such a default judgement will pass to you, and there’s really nothing you can do about it. Don’t let that happen to you, and by keeping your Registered Agent in place, you help prevent something like that happening to you.
Dissolve a Limited Liability Company with L4SB
Don't let an improperly dissolved LLC cause you legal trouble.
Our affordable flat-rate pricing makes it easy to dissolve your LLC online in minutes, with an offering that is customized for the unique requirements of you and your LLC. Fill out our short dissolution questionnaire and our experienced staff of attorneys and paralegals will handle the rest. We ensure that your business is formally closed in an accurate, and efficient manner.
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Dissolve a Limited Liability Company with L4SB
Don't let an improperly dissolved LLC cause you legal trouble.
