Interested in learning how to dissolve an LLC in Michigan? Maybe circumstances have changed and the business can’t continue to operate or you’re just looking for a new challenge and would like to tie up this loose end before embarking on another endeavor. Whatever your reasons are for this big decision, it’s important that you get this right the first time.
Ensuring that the dissolution process goes off without a hitch is very important. It will save you from a lot of headaches down the line, particularly if you miss any of the required steps before the business can be properly wound up. Follow this easy guide to figure out precisely how you need to go about this important task.
Understanding LLC Dissolution in Michigan
So you’ve decided to shut down your business. How do you go about taking care of the entity that you registered for it? You’ll need to terminate it and dissolution is the first step to end the existence of that limited liability company. The idea is simple enough. The LLC ceases the business operations that it was set up for, settles any liabilities or debts it may have, liquidates and distributes any assets among members and ultimately files for dissolution with the state.
There’s usually some event that triggers the need to dissolve the LLC. For example, in your operating agreement, there may be a specific purpose for which the LLC is formed. Once that purpose is achieved, the LLC has to be dissolved. An example of this would be forming an LLC to manage a property and then dissolving it once the property is sold.
Before filing to dissolve your LLC in Michigan, you need to make sure that it’s in good standing status. If it isn’t, you must first restore good standing before proceeding with the dissolution. There are other specific requirements that Michigan requires you to meet, they’re explained in detail later on.
Why Dissolve an LLC in Michigan?
Your Michigan LLC may simply have achieved its purpose so there’s no need to keep it around for much longer. That’s one of the most common reasons why people dissolve LLCs but there are many other reasons as well. For example, the business could be shutting down because it simply can’t compete and there’s no point in continuing to run it at a loss. In that case, the only viable option is to shut down the business and dissolve the LLC.
It often happens that business owners want to pursue a different idea that would require them to cease the current business. A new business is best launched under a different LLC. So if you find yourself in a similar situation, you should first dissolve the previous LLC and then start your new business by forming a new LLC.
How to Dissolve an LLC in Michigan in 7 Steps
Before starting the dissolution process, take note of all of the requirements that you’re supposed to meet. Michigan has some specific requirements for LLCs that wish to be dissolved and they must all be met for the process to be completed without any problems. By following the steps explained in this guide, you can ensure that your limited liability company is properly dissolved.
An LLC is dissolved in Michigan in any of the following instances:
- When all members entitled to vote approve it unanimously
- Automatically at a time mentioned in the Articles of Organization
- Upon a triggering event mentioned in the operating agreement
- Automatically upon the decree of a judicial dissolution
1. Review Your LLC’s Operating Agreement
The operating agreement of your LLC typically outlines the dissolution procedures, as well as the specific triggering events that would necessitate the dissolution of the business entity. Review it closely to understand the dissolution procedures properly.
For example, if the agreement specifies that the LLC must be dissolved upon the sale of the property it was established to manage, it is essential to adhere to the terms outlined in the agreement and initiate the dissolution process accordingly.
Additionally, the operating agreement may include a provision allowing members to vote for the dissolution of the LLC at any time. In such a scenario, if all the members are in unanimous agreement regarding the necessity of dissolving the LLC, the process should be initiated following the agreement’s provisions.
2. Vote to Dissolve an LLC
The dissolution of the LLC hinges on a vote by its members. This process is in accordance with the guidelines specified in the operating agreement. The operating agreement serves as a roadmap, ensuring that all members are duly informed about the impending meeting.
It establishes the criteria required to endorse the dissolution. During the convened meeting, the option to dissolve the LLC should be thoroughly discussed before conducting the official vote. Michigan requires a unanimous vote of all members entitled to vote for the dissolution to be approved.
It’s imperative to carefully review the operating agreement beforehand if the dissolution is being triggered by a vote of the members. The agreement may specify further procedural steps that must be completed for the approval to be considered valid.
3. File Articles of Dissolution
When a qualifying triggering event happens and the dissolution process can begin, Michigan requires the filing of a Certificate of Dissolution with the Department of Licensing and Regulatory Affairs (LARA) through form CSCL/CD 731. This can be done through multiple methods, including online and through the mail.
This form includes basic details about the LLC, such as the name and address of its registered office or that of the Michigan registered agent designated for the LLC. A statement from the members confirming the dissolution will be filed as well. There’s a nominal filing fee of $10 that must be paid when the filing is made.
4. Notify Tax Agencies and Pay the Remaining Taxes
Michigan also requires that a tax clearance certificate be obtained from the Department of Treasury within 60 days of filing the dissolution. This step can be done once the dissolution filing has been made with the Department of Licensing and Regulatory Affairs (LARA).
The department runs a check to see if there are any outstanding tax liabilities against the LLC and will issue a certificate once it’s satisfied that there are no pending dues. Apply for the certificate with the Department of Treasury by filing Form 501, Tax Clearance Request for Corporation Dissolution or Withdrawal.
There’s no fee for this. It typically takes a couple of weeks for this process to complete. If pending tax liabilities are discovered, you will be required to settle them before the certificate is issued.
5. Inform Creditors and Settle Existing Debt
It’s advisable to inform creditors about the impending dissolution of your LLC. This proactive step allows for the resolution of any outstanding claims they may have and helps prevent potential legal issues in the future, where creditors might allege that you intentionally evaded debt payments by discreetly dissolving the business.
As part of the LLC’s winding-up process, it’s mandatory to settle all debts, obligations, and liabilities associated with the entity. If you have creditors, it becomes crucial to notify them about the LLC’s dissolution and to settle any outstanding debts owed by the LLC.
Settle any outstanding liabilities owed to creditors or LLC members who are creditors. They should be prioritized for payment. Following that, members who have made contributions to the LLC and have not received their returns should be made whole. Finally, distributions should be made to members based on their respective shares in the company’s assets.
6. Wind Up Other Business Affairs
Depending on the unique circumstances of your business, there may be various loose ends to address before finalizing the business’s closure. It’s essential to inform your suppliers about the impending closure, allowing them to make necessary arrangements on their end.
Equally important is notifying your customers well in advance, enabling them to explore alternative sources for the products and services they’ve been receiving from your business. If your operations require licenses or permits, it is advisable to proceed with their cancellation. Additionally, if your LLC was authorized to conduct business in another state, you might need to make separate filings to relinquish that privilege.
In case you have employees, it is considerate to provide adequate notice of the business’s closure, facilitating their transition to new employment opportunities. Ensure all remaining wages and obligations are settled before closing the company’s bank accounts.
7. Distribute Remaining Assets
Once all the tax liabilities, debts, and obligations have been settled, any remaining assets and profits should then be distributed among the LLC members based on the terms agreed upon and outlined in the operating agreement.
The shares of each member will be mentioned in the agreement so there shouldn’t be any confusion as to who gets how much. That’s why it’s so important to highlight all these details in the operating agreement so that when the time comes, there’s no conflict among the members.
How Much Does It Cost to Dissolve an LLC in Michigan?
There’s a nominal filing fee of $10 for the Certificate of Dissolution filed with the Department of Licensing and Regulatory Affairs. There are several ways that you can pay this fee. LLC owners can make payments online using their credit cards. There’s also the option of direct account transfer through a prepaid account. Lastly, business owners can also opt for payment pick-up.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Michigan?
It’s easy enough to understand how to dissolve an LLC in Michigan but there’s a reason why so many business owners find it challenging. All the filings need to be meticulous and it’s also key to figure out whether any liabilities need to be settled. This requires jumping through hoops with several departments and can quickly take your time away from focusing on your next steps.
That’s why it can be so advantageous to seek professional help. When you work with experts in the LLC dissolution space, you can rest assured that all your regulatory and compliance obligations will be met and that the business will be dissolved properly. This will reduce any potential problems down the line, allowing you to rest easy.
Michigan LLC Dissolution Made Simple with doola
Many business owners have chosen to benefit from doola’s expert assistance in the dissolution of their LLCs. Our dedicated team ensures a formal and fully compliant dissolution process, diligently meeting all legal and regulatory obligations.
Our approach commences with gathering fundamental information about your LLC, which serves as the basis for filing the Articles of Dissolution. If any additional documents or details are required, we will guide you through the process, tailored to your specific business requirements.
The entire dissolution procedure is professionally managed by our experienced team, providing a comprehensive service from initiation to completion. As soon as the state confirms the official dissolution of your LLC, we promptly inform you. Reach out to us today to discover how doola’s LLC dissolution service can simplify the process for you.
How long does it take to dissolve an LLC in Michigan?
The LLC dissolution process takes no more than a week in Michigan once the filing has been made with the relevant department. It’s possible to pay extra fees to expedite the process.
Can I dissolve my LLC without notifying my members in Michigan?
If the LLC is being dissolved based on a member vote, the dissolution must be unanimously approved by all members entitled to vote, which means it won’t be possible to dissolve your LLC in Michigan without notifying members.
Can I dissolve my LLC if I have pending lawsuits in Michigan?
While you can dissolve your LLC if you have pending lawsuits in Michigan, that won’t end the lawsuits. They will continue to take their course even if the business has been wound up.
Can I cancel my EIN once my LLC is dissolved in Michigan?
EINs aren’t canceled, not even by the IRS. This is a number that remains unique to the business entity to which it was assigned, even after it has been dissolved. The IRS doesn’t reuse or reassign EINs.
What happens if I don’t properly dissolve my LLC in Michigan?
If you don’t dissolve your LLC in Michigan properly, you could be liable for any of the unpaid taxes or liabilities of the business. This is why it’s so important to ensure that the process is done right the first time around.
Can I reopen a dissolved LLC in Michigan?
A dissolved Michigan LLC needs to file a Certificate of Restoration of Good Standing with the Department of Licensing and Regulatory Affairs. A $50 filing fee must be paid in addition to $25 for each delinquent annual statement to be filed.