Whether you’re looking to set up a new business or just want to wind up the one you already have, there could be many reasons why you’d want to learn how to dissolve an LLC in Maryland. It’s important to figure out how to do this process properly the first time around so that you don’t run into any problems down the line.
It’s not that difficult to get started. You could accomplish it all by yourself if you wanted. If you intend to do that, this guide highlights all the necessary steps that you need to follow. It also sheds light on why you might want to consider professional assistance for the dissolution process for reasons that we’ll detail later on.
Understanding LLC Dissolution in Maryland
When you want to terminate a limited liability company, you’ll need to go through a process that’s commonly referred to as LLC dissolution. This marks the beginning of the wind-up process for your business. It sets the wheels in motion to shut down the business entity, settle any debts and liabilities, and distribute any remaining assets among the members.
There’s usually a triggering event in an LLC being dissolved. This might be an act or event that necessitates the LLC to stop its regular business and wind up. These are typically highlighted in the operating agreement. For example, if an LLC was set up to achieve a specific investment objective, and once that’s achieved, it will be dissolved if it was mandated in the operating agreement.
You’ll need to meet some filing requirements when dissolving an LLC in Maryland. These include providing notice to creditors if your business has them, that the company is being wound up. All the steps that you need to follow are explained in detail below.
Why Dissolve an LLC in Maryland?
There could be many reasons why you’d want to dissolve your Maryland LLC. Perhaps the business is unprofitable and not making any money so dissolving the LLC would be a way to prevent financial ruin. It could also be that the objective for which the LLC was set up has been achieved, therefore it’s no longer required.
A dissolution may also result due to a disagreement among members, who may feel that the best course of action is to dissolve the LLC and cease doing business together. Whatever the reason behind the dissolution may be, the process must be done properly, to avoid any issues down the line. Take the time to learn how to dissolve an LLC in Maryland and make sure that you follow all the steps in the necessary order.
How to Dissolve an LLC in Maryland in 7 Steps
Before starting the dissolution process, go through all the steps highlighted here to understand what you need to check before filing the paperwork and what you need to do before making the filings. The guide below tells you everything you need to know about dissolving a Maryland LLC.
1. Review Your LLC’s Operating Agreement
The operating agreement is like a framework for your business entity. It highlights how the business will operate, what the decision-making and dispute-resolution procedures will be, and what triggering events will result in dissolution. For example, your operating agreement might mention that the LLC will be dissolved once it meets its investment objectives.
Take a good look at the operating agreement to figure out the triggering events for your LLC’s dissolution. It will also highlight the mode and manner in which members need to be notified of a resolution to vote on a proposed dissolution.
2. Vote to Dissolve an LLC
If your LLC has multiple members, they will need to vote on the dissolution. Convene a meeting of all members based on the procedure highlighted in the operating agreement. For example, it may require you to provide two weeks’ notice to members for a meeting where a vote on dissolution will be taken.
The option of dissolving the LLC should be discussed at the meeting prior to the vote. Once these formalities have been completed, call a formal vote to confirm that members have given their consent to start the process of dissolving this Maryland LLC.
3. Inform Creditors and Settle Existing Debt
Whether the LLC has creditors or not, this fact needs to be disclosed in the Articles of Cancellation that you file with the state. It’s important to sort this out before filing for dissolution. You’re good to go if the LLC has no known creditors. Simply proceed to the next step.
If it does, Maryland requires that you send them a notice of termination of the LLC via certified mail. The notice must have been sent at least 19 days before you file the Articles of Cancellation with the state. You’ll need to provide the date on which the notice was sent to the known creditors in the filing.
4. File Articles of Dissolution
To dissolve a Maryland LLC, you’ll file the Articles of Cancellation with the Maryland State Department of Assessments and Taxation (SDAT) either online, in person, or by mail. You need to provide several details in this filing, including but not limited to the name of the LLC, its SDAT Number (if known), and the name and address of a Maryland registered agent who will accept service of process on behalf of the LLC for one year following its dissolution.
You’ll also need to mention in this filing the name and address of each member that’s designated to wind up the affairs of the company. If no member was designated, these details must be provided for all members.
5. Notify Tax Agencies and Pay the Remaining Taxes
There’s no requirement for an LLC in Maryland to obtain a tax clearance certificate from the Comptroller of Maryland prior to starting the dissolution process. Some states do require such certificates but Maryland doesn’t. This means that the process gets done quickly since you don’t have to wait for these certificates to arrive before making your filings.
It’s generally recommended to disclose to the IRS that the business is being wound up. This can be done using Form 966 which is filed with the Internal Revenue Service to notify that the LLC has been dissolved.
6. Wind Up Other Business Affairs
Now that the filing has been made to dissolve your LLC, it’s time to wind up your business operations. There will likely be many loose ends that need to be tied. For example, if your business has suppliers, you’ll want to notify them of the dissolution so that they can close your account.
If customers have been using your products and services, it’s important to provide them with ample notice of the termination so that they can figure out any alternatives. If customers have money tied up with your business, figure out a way to provide them with refunds. If you had business licenses to operate in other states, follow their respective processes to terminate those licenses.
You may have employees. Make sure to provide them with notice of the company being wound up so that they can figure out their next steps. Ensure that you clear any dues and payments before closing the company’s bank accounts.
7. Distribute Remaining Assets
Once all the creditors have been made whole and any remaining liabilities of the business have been settled, you need to distribute any remaining profits and assets among the members of the LLC. Consult the operating agreement for how these assets will be disposed of and the funds distributed among the members.
The percentages of their shares will be mentioned in the operating agreement. It may also have other terms that must be followed at this stage of the dissolution process. This is to ensure that all members receive their due shares.
How Much Does It Cost to Dissolve an LLC in Maryland?
There’s a $0 filing fee to dissolve your Maryland LLC if you’re fine with a non-expedited process. This means that you could go through with the dissolution for free. However, the Maryland State Department of Assessments and Taxation does charge a $50 fee for expedited processing, should you decide to speed up the processing.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Maryland?
This guide on how to dissolve an LLC in Maryland has now equipped you with all the knowledge you require to go through the process on your own. That’s not to say this process isn’t challenging for a lot of people, particularly if their LLC has many members, employees, creditors, etc.
No wonder, then, that many business owners in Maryland choose to work with LLC dissolution professionals. It provides them with the peace of mind that the process will be done properly, enabling them to carry on with their future endeavors without something from the past derailing them down the line.
Trust doola For a Clean Break From Your Maryland LLC
The LLC dissolution service provided by doola is preferred by business owners in Maryland. They rely on us to formally and compliantly dissolve their businesses so that they have peace of mind that all the regulatory and legal requirements have been met.
The process starts by collecting some basic information about your LLC before the Articles of Cancellation are filed with the state. If any further information or documents are required, we’ll reach out promptly so that there are no necessary delays in the process. Our dissolution professionals will handle the process from start to finish.
Once they hear back from the state that the LLC has been dissolved, you’ll be the first to know. Reach out to learn more about how doola’s LLC dissolution service can help you get a clean break from your Maryland LLC.
How long does it take to dissolve an LLC in Maryland?
It normally takes the Maryland SDAT up to 8 weeks to process an LLC dissolution filing. This is the timeframe for the $0 fee regular processing. By paying the $50 expedited fee, you can get your application processed within 7 business days.
Can I dissolve my LLC without notifying my members in Maryland?
If you have multiple members in the LLC, a vote will be required to approve the dissolution process based on the procedure highlighted in the operating agreement. You’ll need to provide them with notice of the meeting so that they can vote on the dissolution proposal.
Can I dissolve my LLC if I have pending lawsuits in Maryland?
You can dissolve your LLC in Maryland even if it has pending lawsuits. However, that does nothing to stop the legal actions against the business entity. They will continue even after it has been dissolved.
Can I cancel my EIN once my LLC is dissolved in Maryland?
EINs are not canceled by the IRS. Once the IRS assigns the EIN to an entity, it remains unique to that entity, whether or not it has been dissolved. An EIN, once assigned, is never reused or reassigned to another entity.
What happens if I don’t properly dissolve my LLC in Maryland?
Dissolving an LLC in Maryland properly is very important as there could be penalties otherwise. For example, there may be liability for any unpaid debts or taxes of the LLC, which is just one of the reasons why you must properly conclude the dissolution process.
Can I reopen a dissolved LLC in Maryland?
File the Certificate of Reinstatement form with the Maryland SDAT to reopen your dissolved LLC. There’s a $150 filing fee. You’ll also need to provide some additional documentation, such as a tax clearance certificate.