There might be any number of reasons why you want to learn how to dissolve an LLC in Pennsylvania. Perhaps you’re winding up your business or simply looking to start a new one under a different LLC, you’ll need to figure out how to properly dissolve this business entity.
The process isn’t all that difficult but it’s important to get it right the first time around so that you don’t run into any problems. By following the guide provided below, you can make sure that the dissolution process is done as it’s meant to so that you can focus on your next steps.
Understanding LLC Dissolution in Pennsylvania
Dissolution is the first step in terminating a limited liability company. It’s the start of the winding-up process where the LLC stops doing whatever business it was set up for and if required, liquidates any assets and settles any liabilities.
LLC dissolution generally begins with a triggering event. This could be an event or an act which when it happens requires the LLC to cease its regular business and start the dissolution process. This can be highlighted in the operating agreement. For example, if the LLC was formed to own and manage a property, the operating agreement may mention that the LLC will be dissolved if the property is sold.
There are several requirements that LLCs must meet before they can be dissolved in Pennsylvania. This includes obtaining tax clearance certificates and making the required filings. We’ll discuss them in more detail later on.
Why Dissolve an LLC in Pennsylvania?
You may have different reasons to dissolve a Pennsylvania LLC. Perhaps you no longer want to operate the LLC. It could either be due to a challenging business environment or the idea that you had simply didn’t work. It would then be time to shut down the business and dissolve the LLC.
It could also be that you want to do something different or you cease running your business to take up a job elsewhere. If there’s some other business venture that you want to pursue, it would be best to launch it under a separate LLC. So that’s another instance in which you would want to learn how to dissolve an LLC in Pennsylvania.
How to Dissolve an LLC in Pennsylvania in 7 Steps
There are several important steps that you need to take before the dissolution process even begins. It’s vital to be mindful of these requirements and to make sure that they’re completed before moving forward with the filing. The guide below details everything that you must do to properly dissolve an LLC in Pennsylvania.
1. Review Your LLC’s Operating Agreement
The operating agreement of your LLC will likely mention specific dissolution procedures. It will also have information about specific triggering events which would require the business entity to be dissolved. For example, if it requires the LLC to be dissolved once the property that it was set up to manage has been sold, you’d need to stick with what’s outlined in the agreement and start the dissolution process.
There may also be a provision in the agreement that says that members can vote at any time for the LLC to be dissolved. In that case, if all the members agree that the LLC needs to be dissolved, the process would then be followed.
2. Vote to Dissolve an LLC
Members of the LLC will need to vote on its dissolution. A meeting has to be convened based on the directions provided in the operating agreement. This makes sure that all members are notified about the meeting in due course and also sets forth the percentage or number of members who approve the dissolution.
At the meeting, discuss the option of dissolving the LLC before taking the vote. After all the formalities have been completed, the result of the formal vote will confirm that the members have decided to begin the dissolution process.
Often, an LLC’s dissolution is triggered by a vote of the members. Before a vote is taken, it is important to read the operating agreement. It may set forth the number or percentage of members who have to approve dissolution. It may also require a meeting to be held, notice to be given, and other formalities.
3. Notify Tax Agencies and Pay the Remaining Taxes
Before you go ahead and meet the state’s filing requirements, Pennsylvania mandates that you must first get tax clearance certificates from the relevant departments. This is done to make sure that your LLC has met all its tax obligations and that none are outstanding before it’s wound up.
You’ll need to apply for these certificates to the Department of Revenue (DOR) and the Department of Labor and Industry. Before making the application using form DOR Form REV-181, make sure that you’ve paid any taxes that may be owed to them. There’s no filing fee. It will usually take several weeks for this process to be completed. The certificates will be available online through the website of the Department of Revenue.
4. File Articles of Dissolution
Once the steps above have been completed, go ahead and file the Certificate of Dissolution with the Pennsylvania Secretary of State. This form will include details about your LLC such as its name, the street address of its registered office or that of the Pennsylvania registered agent you chose. A statement highlighting that the members have voted to dissolve the LLC will be included as well.
An authorized individual is required to sign this statement. This can either be a legal representative or a member of the LLC. There’s a $70 filing fee that must be paid to the Secretary of State for the dissolution to be processed. The filing can either be made online through the Pennsylvania Department of State website or through mail.
5. Inform Creditors and Settle Existing Debt
It’s a good idea to notify creditors that you’re dissolving the LLC. This allows you to take care of any claims that they may have and prevent any potential legal troubles later on when creditors claim that you avoided paying debts intentionally by secretly dissolving the business.
As the LLC is being wound up, Pennsylvania requires that any debts, obligations, and liabilities of the entity are discharged. If you have creditors, this means that you’ll need to pay them. Inform them that the LLC is being dissolved and settle any debts outstanding against the LLC.
The state has highlighted a particular order for settling debts. Any creditors, including members of the LLC who are creditors, must be paid first. Then members who made contributions to the LLC that have not been returned previously must be made whole. Lastly, payments must be made to members in line with their share in the distributions.
6. Wind Up Other Business Affairs
Depending on the unique situation of your business, there may be other loose ends you need to tie up before the business is wound up. You should notify any suppliers that the business is closing down so that they can work things out on their end.
It’s also important to notify your customers so that they have ample time to figure out any alternatives for the products and services that they’ve been getting from you. If your business requires licenses or permits, it would be best to cancel them. If your LLC was qualified to do business in another state, you may be required to make separate filings to give up the right to do business there.
If you have employees, it’s only right to give them enough notice of the business shutting down so that they can find another job. Clear any remaining wages and dues before closing company bank accounts.
7. Distribute Remaining Assets
After you’ve settled all the tax obligations, debts, and other liabilities, it’s time to distribute any profits and assets that may be left among the members of the LLC. The distribution percentages for each member will be mentioned in the operating agreement.
There may also be other terms outlined in the agreement. Make sure that they’re followed correctly and that every member receives precisely what they’re entitled to, not more and certainly not less.
How Much Does It Cost to Dissolve an LLC in Pennsylvania?
There’s a $70 filing fee to dissolve an LLC in Pennsylvania. The fee can be paid online through the Department of State’s website. While you are required to obtain tax clearance certificates from the departments mentioned above, there’s no fee to get those certificates. The primary expense is the $70 fee that must be paid to the state along with the certificate of dissolution.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Pennsylvania?
Now that you’ve learned how to dissolve an LLC in Pennsylvania, you realize that it’s possible to do the entire process yourself. However, it can prove to be challenging for most people, particularly if their LLC has multiple members, different creditors, employees, and out-of-state business licenses.
That’s why the vast majority of business owners choose to get professional assistance when they’re dissolving an LLC. It provides them with the peace of mind that the entire process will be done properly and that they won’t be on the hook for any claims either from creditors or tax departments once the business is wound up.
Experience Stress-Free LLC Dissolution in Pennsylvania with doola
Countless business owners have chosen doola’s professional assistance for their LLC dissolution. We’ve helped them formally and compliantly dissolve their business entity, ensuring that all legal and regulatory requirements are met.
We start by collecting some basic information about your LLC before filing the Articles of Dissolution. We’ll let you know if more documents or information is required based on the unique needs of your business.
The entire process is handled by our dissolution professionals from start to finish and once the state lets us know that the LLC has been dissolved, you’ll be the first to know. Reach out today and see how doola’s LLC dissolution service can make your life easier.
How long does it take to dissolve an LLC in Pennsylvania?
The dissolution process doesn’t take more than a week, as that’s all the time the Pennsylvania Department of State needs to process the dissolution application. However, obtaining the tax clearance certificates that are required before the filing usually takes up to a month.
Can I dissolve my LLC without notifying my members in Pennsylvania?
Pennsylvania law requires that your LLC must be dissolved with the consent of all LLC members, so you’ll need to notify the members before dissolving the LLC unless there are provisions to the contrary in the operating agreement.
Can I dissolve my LLC if I have pending lawsuits in Pennsylvania?
You can dissolve your LLC if it has any pending lawsuits in Pennsylvania, however, keep in mind that merely dissolving the LLC doesn’t make those lawsuits go away. The legal actions will continue to take their course even if the LLC is dissolved.
Can I cancel my EIN once my LLC is dissolved in Pennsylvania?
The IRS doesn’t cancel EIN. Once the EIN has been assigned to an entity, it always remains connected to that specific business, even if that entity is dissolved later on. EINs are never reassigned or reused.
What happens if I don’t properly dissolve my LLC in Pennsylvania?
There could be penalties if you don’t properly dissolve an LLC in Pennsylvania. For example, you could be liable for the unpaid debts or taxes of the entity, so it’s important to make sure that the process is done correctly.
Can I reopen a dissolved LLC in Pennsylvania?
No, you can’t reopen a dissolved LLC in Pennsylvania. Dissolved LLCs don’t have an option to be reinstated in Pennsylvania. The only option is to start over and form a new LLC with a new Certificate of Organization and other relevant documents.