Deciding to close your company isn’t easy. You may wish to do nothing more than hang the closed sign on the door and leave. Yet before you close for good, you need to get your business affairs in order. Failing to close your limited liability company or LLC properly can cause legal and financial headaches in the future. Follow this step-by-step guide and learn how to dissolve an LLC in Iowa.
Understanding LLC Dissolution in Iowa
The LLC dissolution process in Iowa is a series of steps you take to close your company. Dissolving an LLC involves several measures necessary to wind up your business operations, settle its debt, pay outstanding taxes and fees, and complete regulatory filings.
The steps to dissolve an LLC in Iowa may seem stressful and lengthy. However, you must dedicate time and effort to properly close your LLC to avoid late filing penalties, unpaid debt, and legal costs.
Why Dissolve an LLC in Iowa?
There are many reasons for dissolving your Iowa LLC. Some LLCs serve an intended purpose; once they have met their goal, there may be no reason to keep them open. Other times, you may want to dissolve your LLC if you sell your company or go out of business. An LLC with multiple members may close if there is disagreement around the company’s operations.
You may close your LLC if you find that an alternative business entity, such as a corporation or partnership, fits better for your company.
How to Dissolve an LLC in Iowa in 7 Steps
The process of dissolving an LLC in Iowa involves several essential steps. Completing each one of them can help you stay compliant and properly close your Iowa LLC.
1. Review Your LLC’s Operating Agreement
A limited liability company prepares an operating agreement when first formed. The agreement outlines how the LLC plans to operate and the necessary steps to take if it decides to dissolve.
If you plan to dissolve your LLC, consult the operating agreement for the necessary protocols. The agreement may list specific events that trigger dissolution, such as the retirement or death of one of its members or bankruptcy.
2. Vote to Dissolve an LLC
The operating agreement may require the members to agree to close the LLC officially. A vote of the LLC’s members is typically required to close the LLC. The operating agreement often details how to notify members of the proposed dissolution and how the vote can be conducted in person or by written consent.
Depending on the terms of the agreement, an in-person or virtual meeting may be necessary with the members to discuss and approve the dissolution of the LLC.
3. File Statement of Dissolution
A statement of dissolution must be filed with the Iowa Secretary of State to dissolve your LLC formally. You can file the statement of dissolution online. Your Iowa LLC terminates once you pay the $5 fee and the dissolution statement is accepted.
4. Notify Tax Agencies and Pay Remaining Taxes
The Iowa Secretary of State doesn’t require tax clearance when closing an LLC. However, you must ensure the completion of all regulatory filings and payment of taxes due. Failure to remit all required returns and taxes may result in unnecessary penalties and collection costs.
- A final Iowa Withholding Tax Quarterly Return (Form 44-095) is required if you pay employees. Even if you did not pay any employees during the last quarter, you must file a return to remain compliant and avoid late filing penalties.
- An Iowa LLC that sells goods or services is subject to sales tax. Complete and file your sales tax return online.
You cancel your Iowa tax accounts by completing the Iowa Business Tax Cancellation form (Form 92-034). The form may be completed online. Or you can mail or fax the completed form to the Iowa Department of Revenue.
Since your LLC’s tax returns vary based on your company’s operations, consulting a tax professional can help you stay compliant by completing the necessary returns.
5. Inform Creditors and Settle Existing Debt
Before you dissolve your Iowa LLC, you are responsible for notifying creditors. A written notice should be sent to your known creditors so that they can submit their claim against the LLC. Written notification should include:
- Any specific information the creditor should consist of in the claim,
- The mailing address to submit the claim,
- The deadline for submitting a claim cannot be less than 120 days from the date of the notice, and
- Statement that the claim may be barred if not received by the deadline.
Letting your creditors know that the LLC is closing is helpful for many reasons. Placing a deadline to submit a claim can help ensure you have accounted for all outstanding debt before making a final payout to the members. Plus, you can avoid any future obligations accruing on your account.
If you do not take the necessary steps to notify creditors that the LLC is dissolving, you could be stuck with unpaid bills, collection costs, and legal fees.
6. Wind Up Other Business Affairs
The LLC must wind up its business affairs when it closes. In addition to the steps you have taken above, winding up your Iowa LLC may include:
- Settling any company obligations, such as leases or loans
- Closing vendor accounts
- Canceling business licenses and permits
- Notifying customers and suppliers
- Finalizing employment matters, such as severance packages
- Closing company bank and credit card accounts
7. Distribute Remaining Assets
An Iowa LLC must first apply its assets to pay taxes owed and unpaid debts. Once the creditor obligations have been satisfied, distribute any remaining assets and profits to the LLC members according to the terms of the operating agreement.
How Much Does It Cost to Dissolve an LLC in Iowa?
There is a $5 filing fee to dissolve your Iowa LLC. You pay the fee online when filing the statement of dissolution. You could incur other costs, such as registered agent fees.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Iowa?
Closing your company can be complicated and time-consuming. While you can follow the steps above to learn how to dissolve an LLC in Iowa, seeking professional help may be advantageous.
Hiring an LLC service can relieve the stress of closing your company, especially if the LLC has multiple members, considerable debt, or numerous filing requirements. You can rest easier by letting the experts handle the filing process for closing your Iowa LLC.
doola Can Help Dissolve your Iowa LLC
When you plan to dissolve your Iowa LLC, turn to doola for help. Our LLC dissolution professionals help you navigate the legal and regulatory steps when you want to close your business. We gather pertinent details, prepare the necessary filings, and let you know if more information is needed. We will notify you once the state confirms your LLC has been dissolved. Find out how doola can help you dissolve your Iowa LLC today.
How long does it take to dissolve an LLC in Iowa?
The time it takes to dissolve an LLC in Iowa depends on the company’s activities. It can take weeks or months to wind up the business, complete the paperwork, and terminate the LLC.
Can I dissolve my LLC without notifying my members in Iowa?
You cannot dissolve an LLC without notifying its members. The LLC’s operating agreement details the process of dissolving it. Most agreements require that members be notified and vote on the proposed dissolution.
Can I dissolve my LLC if I have pending lawsuits in Iowa?
Dissolving your LLC when you have pending lawsuits is possible. However, dissolving your LLC won’t prevent legal action or eliminate your obligation.
Can I cancel my EIN once my LLC is dissolved in Iowa?
You can cancel your EIN once your Iowa LLC is dissolved. However, the IRS won’t close your business account until you file all returns and pay all taxes due.
What happens if I don’t properly dissolve my LLC in Iowa?
Iowa may impose taxes, fees, and penalties if you do not properly dissolve your LLC. You could also be subject to collection costs or lawsuits on unpaid debt.
Can I reopen a dissolved LLC in Iowa?
Reinstatement is possible if your Iowa LLC was administratively dissolved. You must pay a $5 fee plus any outstanding taxes, penalties, or fees due. However, you must apply as a new Iowa LLC if the dissolution was voluntary.