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How to Dissolve a Limited Liability Company (LLC)

By Genki Hirano

Published on 28 Apr 2023 4 min read

Not every business can be a great success, and there can be several reasons why you need to dissolve an LLC. 

Regardless of the reason, there are still important steps you need to take to dissolve an LLC correctly. 

You can dissolve an LLC by coming to a mutual consensus with the other members of the LLC and taking the necessary legal action to allocate any documents. 

In this article, you will learn what you need to know to dissolve an LLC and the main steps you need to take to do so.

Can You Dissolve an LLC?

In short, yes, a Limited Liability Company (LLC) can be dissolved. The process of dissolving an LLC depends on federal procedures but generally requires filing documents such as the Articles of Dissolution. 

Moreover, the LLC’s members may need to vote to dissolve and take action to settle the company’s affairs, such as repaying debts and dividing assets among members.

Upon completion of the dissolution process, the LLC will no longer be recognized as a legitimate business entity.

Should You Dissolve an LLC?

The decision to dissolve an LLC depends on the situation. If the LLC is no longer serving its purpose, is no longer making a profit, or if the members have conflicting differences of opinion — dissolving the LLC might be a wise decision. 

However, if the LLC continues to be profitable and fulfills its purpose, dissolution may not be a logical decision. 

Weigh the legal and financial ramifications of dissolving an LLC, including tax implications and potential liabilities for unresolved debts or obligations. 

If the pressing concern is amongst members, it may be time to have a board meeting to reconcile differences for the sake of the company’s success. 

How to Dissolve an LLC in 6 Steps

If you have decided that dissolving your LLC is the best course of action, the following six steps will help guide you through the process.

1. Vote to Dissolve an LLC

The first step in dissolving an LLC is to hold a meeting with the members and vote on the dissolution. The LLC operating agreement should specify the voting requirements, such as a majority vote or unanimous consent. 

Once the vote is taken, document the decision with written consent or meeting minutes. It’s essential to ensure that all members are aware of the meeting and voting process to avoid litigation over the decision to dissolve the LLC.

This step lays the foundation for the entire dissolution process, as all subsequent steps are dependent on the decision to dissolve.

2. Notify Creditors & Settle Existing Debt

After voting to dissolve the LLC, the next step is to settle any outstanding debts and liabilities including taxes, loans, and creditor obligations.

You must also notify all creditors of the LLC’s intent to dissolve and work out a repayment or liquidation plan to ensure that all outstanding debts are paid.

3. Inform Taxing Authorities & Pay Remaining Taxes

Once all debts and liabilities are paid, the next step is to notify the appropriate taxing authorities of the dissolution of the LLC and pay any remaining taxes.

This may include filing a final tax return and paying any outstanding tax debts. Depending on the state, there may be additional tax requirements that must be met before dissolving the LLC.

4. File Dissolution Papers

Next you will need to file the necessary dissolution documents with the state in which the LLC was formed. This typically involves filing the Articles of Dissolution with the state’s business regulatory agency.

The Articles of Dissolution notify the state that the LLC has been dissolved, and include information such as the name of the LLC, the date of dissolution, and confirmation that all debts and obligations have been paid.

Filing the Articles of Dissolution officially terminates the legal existence of the LLC and avoids any future legal or tax obligations.

5. Wind Up Affairs

After filing the Articles of Dissolution, you will need to wind up the business of the LLC.
This involves completing any remaining tasks necessary to close the business such as: 

• Ending lease agreements 
• Canceling licenses and permits 
• Terminating contracts with vendors and service providers

If the LLC has employees, you may need to lay them off and pay the final payroll taxes.

6. Distribute Remaining Assets

The final step in dissolving an LLC is to distribute any remaining assets of the LLC. Whether it’s cash, inventory, or real estate property, the distribution of assets among members is carried out in line with the provisions stated in the LLC operating agreement.

If the LLC operating agreement does not specify the procedure for distributing assets, state law will govern the distribution. LLC members should document the distribution of assets to avoid future disputes or legal problems.

Once all assets are distributed, the LLC is considered fully dissolved, and its legal existence comes to an end. 

How Much Does it Cost to Dissolve an LLC

In general, the cost of dissolving an LLC can range from a few hundred dollars to several thousand dollars. 

However, the cost of dissolving an LLC varies by state and depends on various factors, including:

• The cost of filing the necessary paperwork 
• Outstanding debts or obligations that need to be settled 
• Any required tax clearances 
• LLC dissolution fees that also vary by state 

Check your state’s specific requirements and fees for dissolving an LLC to ensure that you have the necessary funds and payment methods available.

What to Expect When You Dissolve Your LLC

You don’t have to stress over dissolution, some things are simply meant to come to an end. Let doola help you file your Article of Dissolution and make the process as smooth as possible. 

Our team of professionals can help you with any outstanding payments and ensure that your LLC is dissolved in a legally sound manner. 

Contact doola today for more information on how we can help with your limited liability company dissolution.

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