Your business has run its course, and it’s time to wind up operations and move on to greener pastures. Dissolving your business may cause some emotion, but the process must be orderly and complete. A well-managed business closure offers the peace of mind of knowing you aren’t leaving any loose ends.
Use this guide to find out how to dissolve an LLC in Tennessee before closing the doors on your Tennessee business.
Understanding LLC Dissolution in Tennessee
LLC dissolution refers to the winding up of a limited liability company (LLC). It is the process by which a business ends its legal existence as a business entity. Dissolving an LLC in Tennessee, as in many other states, involves a series of steps and requirements. All are necessary for the orderly closure of your business.
Why Dissolve an LLC in Tennessee?
There are many reasons why members may wish to close a Tennessee LLC, including:
- The business has stopped earning income: If the business isn’t performing and bringing in revenue, it may be time to dissolve the LLC.
- Business goals achieved: If the LLC was formed for a specific purpose, the achievement of the goals may signal the time to dissolve the LLC.
- Financial difficulties: Financial difficulties, like mounting debt or ongoing losses, may lead to LLC dissolution.
- Member disagreements: When members have constant disagreements on business matters, it may be easier to end the LLC.
How to Dissolve an LLC in Tennessee in 7 Steps
Dissolving an LLC in Tennessee is not difficult, but you must pay attention to details and complete all the steps. Here’s how to dissolve an LLC in Tennessee:
1. Review Your LLC’s Operating Agreement
The dissolution process starts with your LLC operating agreement, which contains details about ownership and dissolution procedures. Consult an attorney for advice if your operating agreement is silent on the requirements for dissolution.
2. Vote to Dissolve an LLC
Convene a meeting with all LLC members to discuss and approve the dissolution decision. Voting requirements should appear in the operating agreement. Document the outcome of the vote and place it on record in case of future queries or disputes.
3. File Articles of Dissolution
Prepare and file the necessary legal paperwork, known as Articles of Termination in Tennessee. The Department of State, Division of Business Services, is responsible for approving Tennessee dissolutions.
You can file the notice online, by mail, or in person. Include the filing fee of $20. You will need a tax clearance letter from the Department of Revenue before you can dissolve the LLC. The Secretary of State should approve the dissolution if all debts and taxes have been paid.
Dissolution approval takes three to five days if you email the Articles of Termination or file them online. If you deliver the documents in person, the department will process the documents while you wait.
4. Notify Tax Agencies and Pay Remaining Taxes
You must pay all your taxes with the appropriate tax authorities before dissolving your LLC. Taxes owed may include income tax, employment taxes, and sales and use tax. Consult with a tax professional to accurately complete the returns to avoid any issues.
5. Inform Creditors and Settle Existing Debt
Let your creditors know that you intend to wind up the company, and give them time to reconcile their accounts and resolve outstanding claims. Ensure you pay all invoices or arrange to settle invoices and claims before you dissolve your LLC.
6. Wind Up Other Business Affairs
You are legally and ethically bound to ensure you wind up all business processes before you dissolve the LLC. The process will differ from business to business and depends on the business structure, context, and location. Most businesses will complete the following processes:
- Inform suppliers: Before you close, you’ll need to settle any outstanding claims and invoices, and return any leased, borrowed, or rented equipment.
- Advise customers: Deliver all outstanding orders and settle any claims or returns. Ensure that customers have a contact number in case of problems like warranty repairs.
- End employment contracts: You may have to give notice of your intentions to lay off your employees. The employment contracts and labor laws create payment obligations, like the notice period, final payment, and benefit settlement. Get legal advice if you are unsure of your obligations.
- Inform other stakeholders: Inform landlords and insurers of your pending closure. Settle your lease and contractual obligations.
- Cancel permits and licenses: Avoid future costs or legal disputes. Ensure that all your business permits and licenses are closed.
- Settle credit cards and close business bank accounts: Settle all financial transactions and outstanding balances. Close all business accounts and transfer the funds into the appropriate accounts.
- Asset disposal: Dispose of business equipment and inventory. Estimate the value of the goods and develop an asset disposal plan.
- Storage and disposal of records: There are legislative requirements for record retention and disposal. Sorting records according to these requirements can be a major task. Arrange for the storage and disposal of documents according to your state’s legal requirements.
7. Distribute Remaining Assets
Establish the fair market value of the remaining assets after you have settled your financial and tax responsibilities. LLC members are entitled to the fair distribution of these assets and any profits.
The LLC operating agreement should specify each member’s proportional share. In the absence of clear provisions, distribute the financial assets according to each member’s capital contribution. Record all transactions and keep them on file in case of future queries or disagreements.
How Much Does It Cost to Dissolve an LLC in Tennessee?
In Tennessee, the dissolution filing costs $20. You can pay by credit card or make a direct account transfer when you file the dissolution forms. Factor in the costs of obtaining legal and tax advice. You may also decide to hire an LLC service to cut the risk of delays or disputes.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Tennessee?
If you understand the process and know how to dissolve a Tennessee LLC, you could do it yourself. If your business is simple with few assets, liabilities, or legal obligations, you could dissolve your business at little cost. However, if there are any complexities, you may run into delays and disputes.
The dissolution process is structured. Missing steps or errors along the way will slow the process and cause delays. Disputes and unexpected costs may result from mistakes or omissions.
Dissolution services providers, like doola, know the process. An experienced LLC service will ensure you meet all the state and federal obligations. doola employs specialists with the skills and experience to ensure that your Tennessee LLC is efficiently dissolved. They will lead you through contract closure and ensure that stakeholders are informed.
Don’t get caught up in administrative red tape. Let doola dissolve your LLC while you work on your next big business.
Efficient LLC Closure with doola
Close your business with confidence. Let the trained and experienced business specialists at doola cover the red tape. The three-step doola process is quick and trouble-free.
- You provide doola with the information they need.
- doola completes and submits the Articles of Termination.
- Your doola agent informs you about the final dissolution sign-off.
Don’t lose sleep over your business closure. Let the experts at doola file and finalize your Tennessee LLC dissolution.
How long does it take to dissolve an LLC in Tennessee?
The Tennessee Division of Business Services takes three to five days to dissolve a business if your application arrives online or by mail. In person, they do it while you wait. Factor in time for other issues, like tax returns and stakeholder advice.
Can I dissolve my LLC without notifying my members in Tennessee?
In Tennessee, the requirements for dissolving your LLC must appear in the LLC operating agreement. It is also vital that you consider the legal and ethical implications of dissolving the LLC without informing all members.
Can I dissolve my LLC if I have pending lawsuits in Tennessee?
Yes, you can dissolve the LLC if you have pending lawsuits. However, the LLC is still liable to settle any liabilities that result from the pending lawsuits.
Can I cancel my EIN once my LLC is dissolved in Tennessee?
You can request the cancellation of the EIN once the Tennessee LLC is dissolved as the EIN is associated with the business entity.
What happens if I don’t properly dissolve my LLC in Tennessee?
Failing to properly dissolve your LLC in Tennessee can lead to legal and financial consequences. You could be personally liable for any debts or liabilities.
Can I reopen a dissolved LLC in Tennessee?
Reinstatement of your Tennessee LLC is possible at any time after you have dissolved it.