Sometimes, good things come to an end. Whether you’re walking away from a successful business that’s run its course or closing an LLC you never used, the basic steps to dissolve an LLC are the same. In Texas, you’ll need to wind up the business activities and pay all relevant taxes before making a simple filing. Read on to learn how to dissolve an LLC in Texas.
Understanding LLC Dissolution in Texas
Dissolving a Texas LLC is a key step in officially closing a company’s affairs and removing its standing as a legal business entity within the state. To dissolve a business in the state of Texas, you’ll need to make a filing with the Secretary of State.
You’ll need to dissolve a Texas LLC when the company is no longer economically viable, if the company’s business purpose is completed, or when you no longer need the LLC. Fortunately, Texas allows you to dissolve a company easily.
Why Dissolve an LLC in Texas?
There are numerous instances where dissolution is good for your LLC. For example, if you no longer want to operate the LLC or want to pursue another business venture through a different business entity.
Dissolution is a good idea when you no longer want to operate the LLC. Likewise, if you have multiple LLCs for different purposes, dissolving the ones you don’t use is a good idea. Reasons to dissolve an LLC include:
- Investing in other business opportunities
- The LLC is no longer needed
- Loss of business viability
- The business is closed or inactive
- If you are no longer allowed to operate a US business
Note that if you’re a visa holder who created an LLC, you don’t need to dissolve a Texas LLC that is still in use or has a business purpose, even if you’re no longer in the US.
Common examples of why you might close an LLC include:
- You created an LLC for a rental property and sold the rental property.
- You created an LLC for an online business you no longer operate (such as an Etsy business).
- You created an LLC with the intention of starting a business but never started the business.
- The business has merged with another company, and the LLC is no longer needed.
How to Dissolve an LLC in Texas in 7 Steps
To dissolve a Texas LLC, you must follow the steps outlined in the company’s operating agreement. You’ll need to complete the “winding up” process and then file formally with the Secretary of State and the Texas Department of Revenue. Depending on the business assets and liabilities, you may need to take additional steps for dissolution.
1. Review Your LLC’s Operating Agreement
It’s essential to understand the specific dissolution procedures outlined in your LLC’s operating agreement. The operating agreement outlines key information that proves the member’s ownership of the LLC and their rights regarding its dissolution.
Understanding specific dissolution procedures in your LLC’s operating agreement is essential. While the requirements and procedure for company dissolution vary amongst LLCs, many require all board members’ approval by unanimous vote in a meeting.
2. Vote to Dissolve an LLC
For most LLCs, you’ll need to convene a meeting with all LLC members to discuss and approve the dissolution decision. In the meeting, members may want to review dissolution procedures and the LLC’s assets and liabilities in preparation for the dissolution process.
3. Notify Tax Agencies and Pay Remaining Taxes
Ensure you file all necessary tax returns, including income tax and employment tax returns, with the appropriate tax authorities. Consult with a tax professional to accurately complete these filings.
The entity must be in good standing with the Texas Comptroller of Public Accounts. Once you’ve paid all taxes, you can request a certificate of good standing from the Texas Comptroller of Public Accounts. You’ll need to file this with the Articles of Dissolution.
You can contact the Tax Assistance Section, Comptroller of Public Accounts, Austin, Texas, by phone at (512) 463-4600 or toll-free (800) 252-1381. You can also email to firstname.lastname@example.org.
4. Inform Creditors and Settle Existing Debt
If the business has any outstanding debts, such as credit card debt or loans, the business will need to pay these off before the dissolution is finalized. Regardless of whether the LLC has debt, you should notify the creditors and close any lines of credit as part of dissolving an LLC.
5. Wind Up Other Business Affairs
As part of dissolving a Texas LLC, you’ll need to wind up all other aspects of business operations. This is officially called “winding up” and is outlined in the Texas Business Organization Code.
- Notify suppliers and customers that the business is closing
- Cancel business licenses and permits
- Contact the local Chamber of Commerce
- Handle employee matters, including severance packages, if relevant
- Close company bank accounts
- Prepare the final closing with your company’s Texas registered agent
6. Distribute Remaining Assets
Once all debts, obligations, and tax liabilities have been settled, distribute the remaining assets and profits among the LLC members according to the agreed-upon terms outlined in the operating agreement.
This may include equal percentages or any other percentages stated in the operating agreement. If the LLC has outstanding debts, the members may be liable for paying off these debts before distributing the remaining assets.
7. File Articles of Dissolution
Prepare and file the necessary legal paperwork, known as Articles of Dissolution, with the Texas Secretary of State. In Texas, you’ll need to file Form 651 and pay a $40 filing fee. The certificate of termination must state the nature of the event leading to the closing of the entity, according to sections 11.051 to 11.059 of the Texas Business Organizations Code Chapter.
In the Articles of Dissolution, you must also set forth the name and address of each governing person of the entity, including members and managers if the LLC is manager-managed. Finally, include a copy of the certificate of good standing from the Texas Comptroller of Public Accounts.
You can submit a duplicate Form 651 with the $40 filing fee by mail or fax to:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
FAX: 512 463-5709
How Much Does It Cost to Dissolve an LLC in Texas?
It costs $40 to dissolve an LLC in Texas. You can pay by check, money order, cash, credit card, or legalese. You will be charged an additional statutory convenience fee of 2.7% for credit card payments.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Texas?
You can easily follow all the steps to dissolve an LLC yourself. However, it can be more advantageous to tap professional assistance to save time and hassle for the dissolution process.
If the LLC has outstanding debt, outstanding taxes to file, or significant physical assets to distribute or sell as part of the dissolution process, getting professional help can simplify the process. The support of a tax professional, lawyer, or professional dissolution service can make sense for many companies.
Dissolving a Texas LLC with doola
When you’re working on wrapping up business operations, dealing with employees and other obligations of closing a business, you don’t want to have to deal with dissolution paperwork.
doola can help with its customized LLC dissolution services.
With doola dissolution service, you’ll create an account and doola will collect the basic information about your company. Then, it will prepare the Articles of Dissolution and get back to you with any additional information needed.
When Texas officially confirms the dissolution is complete, doola will let you know immediately. It’s that simple! Get doola LLC dissolution to save time and avoid the hassle of dissolution!
How long does it take to dissolve an LLC in Texas?
You will need to complete the company winding up before you dissolve it. Then it usually takes three to five days to dissolve an LLC in Texas.
Can I dissolve my LLC without notifying my members in Texas?
No, you cannot dissolve the LLC without informing the LLC members. The procedures for dissolution are outlined in the LLC operating agreement. However, if the LLC is manager-managed, the manager may file the Articles of Dissolution.
Can I dissolve my LLC if I have pending lawsuits in Texas?
Generally, you cannot dissolve the LLC if there are pending lawsuits in Texas. However, it’s worth speaking with a Georgia business lawyer to understand your situation’s options.
Can I cancel my EIN once my LLC is dissolved in Texas?
You can inform the IRS to close the business account, although you cannot cancel an EIN. You will need to send a letter to the IRS that includes the complete legal name of the entity, the EIN, the business address, the reason you wish to close your account, and a copy of the EIN Assignment Notice issued with your EIN.
Mail this information to:
Internal Revenue Service
Kansas City, MO 64108
Internal Revenue Service
Ogden, UT 84201
What happens if I don’t properly dissolve my LLC in Texas?
If you fail to dissolve your Texas LLC properly, it could expose your business to liability and possible penalties. In addition, Texas requires LLCs to file an annual franchise tax report and failure to do so can result in additional penalties.
Can I reopen a dissolved LLC in Texas?
Yes, you can reopen a dissolved LLC in Texas. You can reinstate an LLC by filing for either an Application for Reinstatement alongside a Set Aside Tax Forfeiture or by obtaining a Texas Certificate of Reinstatement from the Texas Secretary of State and paying a $75 filing fee. If the LLC was dissolved, you have 36 months to reinstate it.