Closing your limited liability company is a tough call, especially when you have invested time and money to build it. Shutting down your business may be necessary if it’s not turning a profit or if you want to start a new venture. Yet you cannot simply walk away when your business is organized as a limited liability company.
An LLC needs to undergo a dissolution process to be properly closed. This process may sound daunting, but you can use this guide to understand how to dissolve an LLC in Connecticut.
Understanding LLC Dissolution in Connecticut
Dissolution is the formal process of closing your limited liability company and winding up its business affairs. You can dissolve your Connecticut LLC when you submit the necessary forms, settle open debts, file and pay taxes, and wind up the company’s operations. After the LLC has satisfied its obligations, whatever assets remain get distributed to its members.
Why Dissolve an LLC in Connecticut?
As a member, you can dissolve an LLC for a variety of reasons. If your company struggles to stay afloat, you may close it and pursue another business venture. An LLC might dissolve if a member retires or passes away or if it goes into bankruptcy.
Some LLCs operate for a specific purpose. Once the LLC reaches these business goals, it may be time to close the company. In other cases, you may dissolve your LLC if a different business entity structure fits better for your company.
Regardless of the reason, knowing how to dissolve your LLC in Connecticut is essential.
How to Dissolve an LLC in Connecticut in 7 Steps
Dissolving an LLC in Connecticut may seem daunting, but it is a critical process to undergo to ensure you cease your business activity the right way. The steps to close your Connecticut LLC include:
1. Review Your LLC’s Operating Agreement
An LLC’s operating agreement typically outlines the dissolution process. The agreement may require dissolution if a member retires or passes away. Or it may allow dissolution when the LLC’s members agree to it. Following the dissolution procedures is essential to ensure you uphold the terms of the agreement.
2. Vote to Dissolve an LLC
The operating agreement may require all LLC members to approve dissolution. Review the agreement for any notification requirements. Schedule a meeting if the agreement requires the members to meet in person or virtually to discuss and approve the dissolution. Sometimes, the operating agreement may allow members to provide written consent to dissolve the LLC. The dissolution vote’s outcome should be documented in the LLC’s minutes.
3. File Certificate of Dissolution
To ensure your Connecticut LLC is properly closed, you must file a Certificate of Dissolution with the Secretary of State. You may file for dissolution online, or you can mail the completed Certificate of Dissolution form to the Office of the Secretary of State in Hartford, Connecticut.
4. Notify Tax Agencies and Pay Remaining Taxes
While getting tax clearance isn’t required to close your company, your Connecticut LLC must file all the necessary returns and remit any unpaid taxes. Even if you mark your tax returns as final, the LLC must go through the process to formally close all its state tax accounts. If not, the LLC’s tax accounts may remain open and you could be subject to filing fees, penalties, and taxes.
Tax accounts can be closed online with the Connecticut Department of Revenue. Enter the date of closure for the LLC’s sales tax, payroll tax, and business tax accounts. You will receive a confirmation number once your submission is complete.
The Department of Revenue may take several days to review and process your request. The LLC remains responsible for any filing requirements and taxes due up to the closing date.
5. Inform Creditors and Settle Existing Debt
The LLC should notify its creditors that it plans to close and work to settle any outstanding debt. Since the LLC’s obligations are paid out of its assets and profits, settling debt before the company dissolves helps you avoid costly legal issues in the future.
If you decide to send written notification to your creditors, the correspondence must include:
- Specify the information necessary to be included within the claim.
- State that creditors must submit their claims in writing.
- Provide a mailing address to send the claim.
- State what the deadline for receiving claims is. As a general note, the deadline must be at least 120 days after the creditor receives the notice.
- State that claims received after the deadline might be disallowed.
6. Wind Up Other Business Affairs
Beyond the steps listed above, there are other necessary steps you take when winding up the business affairs of your LLC. Depending on your business operations, you should make plans to:
- Notify your customers and suppliers that your LLC is closing.
- Cancel your business licenses and permits.
- Tend to any employment matters, such as severance packages.
- Consider setting up a contingency fund for unpaid liabilities.
- Address any company obligations, such as rental leases or equipment loans.
- Close your company’s bank and credit card accounts.
7. Distribute Remaining Assets
An LLC pays its outstanding debt and tax liabilities from its assets. Once the LLC has satisfied its obligations, whatever assets remain are distributed to its members. The LLC’s operating agreement may outline the percentage paid to each member.
How Much Does It Cost to Dissolve an LLC in Connecticut?
Connecticut does not charge a filing fee to dissolve an LLC. However, you could incur fees from your registered agent or tax accountant when dissolving your LLC.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Connecticut?
By following the steps above, you can dissolve your Connecticut LLC on your own. Keep in mind that the dissolution process can be lengthy and complicated. You could be stuck with a legal and financial mess if you don’t closely follow the terms of your LLC’s operating agreement or fail to file the necessary paperwork with the state.
Hiring an LLC dissolution service can be beneficial when you are stretched for time or unsure about the process. An LLC service can help you meet your regulatory obligations when closing your company.
doola Takes the Guesswork Out of Closing Your Connecticut LLC
Does the idea of muddling through the process of closing your company stress you out? Nervous that you may miss a step along the way? Why not reach out to doola for help? At doola, we help business owners meet the necessary regulatory requirements when dissolving an LLC.
It’s easy to get started with doola. Just provide us with some basic information about your Connecticut LLC, and we begin the filing process for your Certificate of Dissolution. We will reach out if we need more information. We let you know once the state has dissolved your LLC. Learn more about doola’s LLC dissolution services today.
How long does it take to dissolve an LLC in Connecticut?
It may take a few days to process your certificate of dissolution. However, completing all steps to dissolve your Connecticut LLC could take a few weeks or months.
Can I dissolve my LLC without notifying my members in Connecticut?
Unless the operating agreement says otherwise, you must notify its members before you can dissolve an LLC in Connecticut.
Can I dissolve my LLC if I have pending lawsuits in Connecticut?
Yes, you can dissolve your Connecticut LLC even if you have pending lawsuits. However, dissolution does not remove your obligation to satisfy your debt.
Can I cancel my EIN once my LLC is dissolved in Connecticut?
Yes, you can cancel your EIN once you dissolve your Connecticut LLC. The IRS will only close your business account once you have filed and paid all due taxes.
What happens if I don’t properly dissolve my LLC in Connecticut?
An LLC remains responsible for its tax and regulatory filings until properly dissolved. If you dissolve the LLC, you could avoid incurring costly late filing penalties, fees, and taxes.
Can I reopen a dissolved LLC in Connecticut?
If you voluntarily dissolve your LLC, you cannot reopen it. Instead, you must set up a new Connecticut LLC. When an LLC is administratively dissolved, reinstatement may be possible if it is not closed by court decree. If the LLC’s name is no longer available, you must change the business name by amending its Certificate of Organization.