Whether you have been running your limited liability company (LLC) for one year or 20, closing your company can be emotional. You may struggle to pay your LLC’s bills, or it may just be time to pursue a new venture. Regardless of the reason, it is essential to undergo a formal dissolution process when closing your Kentucky LLC. Failure to do so can cause legal and financial problems in the future. You can use this guide to learn how to dissolve an LLC in Kentucky.
Understanding LLC Dissolution in Kentucky
A limited liability company (LLC) goes through a dissolution process when you want to close permanently. Dissolving your Kentucky LLC involves settling the company’s debts and obligations, completing all regulatory filings, and distributing the remaining assets and profits.
While the process may seem extensive, taking the appropriate steps can keep you from being hit with costly filing fees and possible litigation for any unpaid debt.
Why Dissolve an LLC in Kentucky?
The member or members of an LLC may opt for dissolution for many reasons. The company may need to close if it is experiencing severe financial difficulties. The LLC may face economic hardships due to changing market trends or increased competition.
Other times, an LLC may require dissolution if a member retires or dies. When an LLC has multiple members who disagree on how the company operates, the LLC may need to dissolve. Or you might dissolve the LLC if another business entity, such as a partnership or corporation, is a better fit for your company.
Regardless of the reason you decide to close your company, it is essential to understand how to dissolve an LLC in Kentucky.
How to Dissolve an LLC in Kentucky in 7 Steps
You undergo a series of steps to dissolve your LLC in Kentucky. Each action may differ slightly based on your LLC’s operating agreement and business activities. Below is an overview of the steps you should expect to take when closing your Kentucky LLC.
1. Review Your LLC’s Operating Agreement
An LLC’s operating agreement typically details the steps to dissolve it. When you intend to dissolve your Kentucky LLC, understanding and following the terms in the operating agreement is essential.
The agreement may state that specific events trigger dissolution, such as the death or retirement of a member or a substantial sale of its assets. Or the agreement may allow dissolution with member consent.
Unless the operating agreement states otherwise, the State of Kentucky accepts the written consent of all members in the LLC for dissolution.
2. Vote to Dissolve an LLC
Most operating agreements require the members to meet and approve the LLC’s dissolution. The agreement may require you to give notice to the members and schedule a meeting. Some operating agreements may allow the members to meet virtually or submit their consent in writing. Once you’ve conducted the vote, document the outcome in the LLC’s minutes.
3. File Articles of Dissolution
To dissolve an LLC, you must file the Articles of Dissolution with the Kentucky Secretary of State. You can complete and mail the form to the Secretary of State in Frankfort, KY.
4. Notify Tax Agencies and Pay Remaining Taxes
When dissolving an LLC in Kentucky, you aren’t required to get a tax clearance letter from the Department of Revenue showing that all required taxes have been paid. However, the LLC must still meet all regulatory filing requirements and pay any taxes due. You might face late filing or other penalties if you do not submit any tax or regulatory returns timely.
The Secretary of State recommends you contact the following entities to ensure you have no other regulatory or financial obligations:
- Internal Revenue Service
- Kentucky Department of Revenue
- Kentucky Department of Unemployment Insurance
- Your county clerk’s office if you pay taxes or fees at the county level.
If you have employees or are subject to sales tax or corporate income tax, complete Form 10A104 – Update or Cancellation of Kentucky Tax Account(s). You must complete and mail the form to the Department of Revenue. Failure to close your Kentucky tax accounts may result in fees for delinquent tax returns.
Making sure you have filed all returns and paid your taxes can be complicated when closing your company. Seeking the help of a tax professional can help you file your last returns accurately and timely.
5. Inform Creditors and Settle Existing Debt
An LLC in Kentucky should take steps to notify creditors and settle unpaid debt. The State of Kentucky does not require you to inform creditors that the LLC is closing. However, notifying your creditors in writing can protect the LLC from future claims.
While written notification is not required, the state suggests any communication include:
- Relevant information that the creditor must provide.
- The mailing address to send the claim.
- The deadline to submit a claim may not be less than 120 days from the date you submitted the Articles of Dissolution or the date you sent a written notification to creditors.
- Statement that claims may be barred if not received by the deadline.
6. Wind Up Other Business Affairs
During the wind-up phase, the LLC is limited to collecting assets, discharging its debts, and distributing any remaining property to its members. In addition to the steps above, an LLC typically focuses on:
- Closing its business bank and credit card accounts
- Notifying customers and suppliers
- Addressing leases, loans, and other company obligations
- Settling employment matters
- Canceling business licenses and permits.
7. Distribute Remaining Assets
Before distributing any remaining assets to the members, the LLC shall pay, or set funds aside to pay its liabilities and obligations. Whatever assets and profits are left will get distributed to its members based on the LLC’s operating agreement terms.
When the operating agreement doesn’t specify how to distribute the remaining assets, the State of Kentucky requires the LLC to follow the order below:
- Satisfy liabilities for member distributions
- Return of member contributions
- Distribute the remaining assets in proportion to the members’ respective rights.
How Much Does It Cost to Dissolve an LLC in Kentucky?
The fee to dissolve your Kentucky LLC is $40.00. Checks should be made payable to the Kentucky State Treasurer and mailed in with the LLC’s completed Articles of Dissolution. You could also incur a fee for your registered agent or if you use a tax accountant to file your returns.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Kentucky?
You can walk through the dissolution steps on your own when you know how to dissolve an LLC in Kentucky. However, LLC dissolution has its complications. Consider hiring an LLC dissolution service if you have substantial debt or several tax filings. Using a professional LLC dissolution team relieves you of the stress of closing your company. An LLC dissolution service can ensure you address all necessary steps when closing your company.
Let doola Take Away the Stress of Closing Your Kentucky LLC
Closing your Kentucky LLC can take time and effort. Why not take the guesswork out of closing your company and use a professional LLC dissolution service like doola? doola helps you work through dissolving your Kentucky LLC. Once you provide us with some basic information, we get to work to close your LLC. We’ll ask you for more details when necessary. Upon notification that the Kentucky LLC dissolution process is complete – you will know immediately.
How long does it take to dissolve an LLC in Kentucky?
It typically takes a few days to process the Articles of Dissolution once the Kentucky Secretary of State receives it. However, going through the entire dissolution process can take weeks or months to complete.
Can I dissolve my LLC without notifying my members in Kentucky?
No, you cannot dissolve an LLC in Kentucky without notifying its members.
Can I dissolve my LLC if I have pending lawsuits in Kentucky?
Yes, you can dissolve your Kentucky LLC even if you have pending lawsuits. However, closing your company does not eliminate the LLC’s legal obligations.
Can I cancel my EIN once my LLC is dissolved in Kentucky?
Yes, you can cancel your EIN once you’ve dissolved your Kentucky LLC. However, the IRS will only close your business account once you file all returns and pay the due taxes.
What happens if I don’t properly dissolve my LLC in Kentucky?
If you don’t go through the proper filing process when dissolving your Kentucky LLC, you may be subject to additional taxes, fees, and penalties. Plus, you might be subject to further legal or financial complications if the LLC has unpaid debt or obligations.
Can I reopen a dissolved LLC in Kentucky?
You can apply to reinstate an administratively dissolved Kentucky LLC. As long as the LLC has not acted in a fashion to wind up its business operations and it cures the cause of its dissolution, the LLC may apply for reinstatement. You cannot reopen a voluntarily-dissolved LLC.