Setting your business up as a limited liability company or an LLC helps protect you as an owner. Once you have established your business as an LLC in Illinois, what happens if you decide to close your company? Are there any steps you need to take to close your LLC, or does it just go away when you file your final tax return? Learn how to dissolve an LLC in Illinois if you plan to close your business.
Understanding LLC Dissolution in Illinois
You must complete a dissolution process to close an LLC in Illinois. When you dissolve an LLC, you must pay the company’s debts, file the necessary returns and reports, and wind up its financial affairs. The process is predictable, but someone unfamiliar with the procedures may need help navigating a dissolution.
Why Dissolve an LLC in Illinois?
When you no longer want to operate your Illinois LLC, you should take steps to dissolve it. Otherwise, if the LLC still exists, it could be liable for taxes, required to file and pay for annual reports, or be sued.
During the dissolution process, you close out financial affairs and settle the company’s debts. Once that is complete, you won’t have lingering debts or tax returns to handle.
You might close your LLC when you retire or decide to pursue other business opportunities. You will also likely close your Illinois LLC if you want to operate as a different business entity, such as a corporation. Another example is if the LLC has multiple members who disagree on business decisions – they may opt to close the company.
How to Dissolve an LLC in Illinois in 7 Steps
Dissolving an LLC in Illinois can be complicated and time-consuming. Below are seven steps to take when dissolving an LLC.
1. Review Your LLC’s Operating Agreement
Review the dissolution procedures outlined in the LLC’s operating agreement. The agreement may state how the LLC should dissolve, wind up its financial affairs, and distribute the remaining assets to its members.
2. Vote to Dissolve an LLC
Most LLC operating agreements require the members to approve the dissolution measure. Approval is commonly accomplished by taking a vote or giving written consent. The agreement may require that members receive sufficient notice of the meeting. The operating agreement may outline if the members must be present to vote and what percentage of members must approve the dissolution.
The minutes of the LLC should document the time and place of the meeting, as well as the outcome of the vote to dissolve.
3. File Articles of Dissolution
You must submit an Illinois Statement of Termination (Form LLC-35.15) to the Secretary of State to dissolve the LLC. The form may be mailed, delivered in person, or submitted online.
An LLC must be in good standing to be voluntarily dissolved. An LLC may not be terminated or withdrawn if the company status has been revoked, expired, or administratively dissolved.
4. Notify Tax Agencies and Pay the Remaining Taxes
The Secretary of State requires an LLC to get tax clearance, which is documentation that you’ve paid all due taxes. Regardless, you should file all required state tax returns as you close the LLC’s financial affairs, including:
- If you pay employees, you should file a final Form IL-941 Illinois Withholding Income Tax Return.
- Companies that collect sales tax should file a final Form ST-1 Sales and Use Tax Return.
- If your LLC is taxed as a corporation, you should submit a final Form IL-1120 Corporation Income and Replacement Tax Return.
In addition to filing final state returns, you should also submit final federal tax returns. Consulting a tax professional may be necessary to ensure you submit all required returns and pay any taxes due.
5. Inform Creditors and Settle Existing Debt
Notify creditors that the LLC is being dissolved. Take steps to settle any existing debt and close out the LLC’s accounts to avoid future charges or late fees.
6. Wind Up Other Business Affairs
Winding up the affairs of your LLC is necessary. The steps may be different based on the LLC’s business operations, but winding up typically includes:
- Canceling business licenses, permits, and fictitious names.
- Paying creditors or establishing reserves for anticipated invoices
- Closing employee matters, such as severance packages
- Notify customers and suppliers
- Close company credit cards and bank accounts
- Negotiating any remaining terms for finance or lease agreements
7. Distribute Remaining Assets
The last step is distributing any remaining assets to the LLC’s members. Until the LLC has paid its taxes, debt, and other obligations, you should hold off on distributing any remaining assets. Refer to LLC’s operating agreement for guidance on who gets what.
How Much Does It Cost to Dissolve an LLC in Illinois?
You must send a $5 filing fee made payable to the Secretary of State to dissolve your LLC. Checks are accepted when mailing or delivering the form in person. You may also remit the $5 fee if you file the return online.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Illinois?
Dissolving an LLC can be time-consuming. You need to be familiar with the terms of the operating agreement and dedicate time to closing the LLC’s business affairs. Plus, you need to remain compliant with tax returns and other filings.
You can tackle dissolving an LLC on your own. However, there are advantages to hiring an LLC service to assist. An LLC dissolution service can reduce the stress of closing your company. They can help ensure you file all necessary forms and returns.
Closing your Illinois LLC with doola
Closing your Illinois LLC may require some planning and paperwork. You need to comply with the operating agreement, file all necessary forms and tax returns, and devote time to closing your company’s business operations.
doola takes the stress out of closing your Illinois LLC. Our three-step dissolution process makes closing your LLC a lot easier. Submit your information, and we’ll take care of filing the dissolution forms on your behalf. Learn more by contacting doola today.
How long does it take to dissolve an LLC in Illinois?
Dissolving an LLC can be a time-consuming process. Depending on how much business your LLC does, it could take a few weeks to a few months to dissolve your Illinois LLC.
Can I dissolve my LLC without notifying my members in Illinois?
Unless the operating agreement is silent or does not exist, you should notify members of any dissolution plans for the LLC.
Can I dissolve my LLC if I have pending lawsuits in Illinois?
You should resolve pending lawsuits before dissolving your LLC in Illinois.
Can I cancel my EIN once my LLC is dissolved in Illinois?
Once you have completed the dissolution process and filed your federal tax returns, you can cancel the employer identification number (EIN) for your LLC.
What happens if I don’t properly dissolve my LLC in Illinois?
An Illinois LLC that is not properly dissolved remains liable for taxes and annual reports. The LLC could be subject to lawsuits if not dissolved.
Can I reopen a dissolved LLC in Illinois?
If your Illinois LLC was administratively dissolved or revoked, you may apply for reinstatement by completing Form LLC-35.40 / 45.65. You must send two copies of the form and a $200 filing fee to the Secretary of State.