If your Alabama LLC is no longer serving a purpose or facing legal trouble, you may be wondering how to dissolve an LLC in Alabama.
This process can be complicated, but with the help of this guide, you will be able to dissolution your LLC in a smooth and timely manner. We will walk through each step of the process and explain the reasons why business owners might choose to dissolve their LLC in Alabama.
Steps to Dissolving an LLC in Alabama
Every Alabama limited liability company must follow the official procedure proposed for the dissolution process. Every step of the process is vital so that the owners can protect themselves from personal financial liability.
Step 1: Notify all LLC members
LLC members must vote on dissolution. The LLC must give each member at least seven days' notice of the meeting date, time, and location of the dissolution meeting.
The dissolution vote must be by a majority of the LLC members unless your LLC operating agreement specifies a different voting requirement. Only members present at the meeting or have properly waived notice can vote on dissolution.
Distributing assets should also be one of the points of the meeting. If you are the sole business owner of the LLC, you don't need to have a meeting.
Step 2: Follow the LLC Operating Agreement
Alabama LLC operating agreement is the governing document of your business entity.
Apart from containing the rules of how you conduct business, it should also outline the dissolution rules.
If your LLC doesn't have an operating agreement, the Alabama law will dictate how the dissolution process will play out.
In either case, it is essential to follow the terms of the Alabama LLC operating agreement or statutes closely to avoid any confusion or disputes among members.
Failing to do so could result in protracted and costly litigation.
LLC assets and liabilities should be transferred appropriately and allocated among the members. Any remaining LLC assets should be distributed in accordance with the governing documents.
Step 3: Announce Dissolution to Third Parties
It is important to notify all interested parties of the LLC dissolution process, including creditors, taxing authorities, and other stakeholders. This step can help minimize any potential damages that may occur after the business has officially ceased operations.
In Alabama, limited liability companies should distribute the remaining assets only after settling business debts. Any remaining assets should be distributed to the company's members in proportion to their ownership interests.
Step 4: Close Business Tax Accounts
Various tax accounts for an Alabama LLC must be closed when the business is dissolved.
The Alabama Department of Revenue website provides a guide for how to close these accounts.
Common taxes that must be closed include Alabama Corporate Income Tax, Withholding Tax, Sales and Use Tax. Complete the final return for each tax type. Be sure to indicate on the return that it is a final return.
You should also contact the Internal Revenue Service to settle any outstanding taxes and close your IRS account. IRS Form 8832 is used to close the LLC's tax status with the IRS.
Make sure to close your business licenses with the Alabama Secretary of State. File Form LLC-12, Final report of business entity. This form reports the date of dissolution, the business name and address of company officers, and the signature of an officer.
Step 5: File LLC Articles of Dissolution
Alabama Secretary of State requires LLCs to file Articles of Dissolution before they can dissolve. To do this, you'll need to fill out the Articles of Dissolution form available on the Alabama Secretary of State website.
The state filing fee for the Articles of Dissolution is $100, and you can only submit your dissolution filing by mail.
The Articles of Dissolution must contain your full business name, mailing address, the effective date of the dissolution, and the signatures of all members.
Reasons to Dissolve an Alabama LLC
When an Alabama LLC no longer wants to transact business, the owners usually decide to dissolve it. An Alabama company that dissolves voluntarily may do so for any reason. On the other hand, the State can also dissolve the limited liability company if it doesn't follow specific requirements.
Voluntary Dissolution of an Alabama LLC
To voluntarily dissolve an Alabama LLC, the owners have to file the official paperwork with the Alabama Secretary of State and pay state filing fees. The reasons why owners decide to dissolve their business can be personal, financial, or legal.
Most commonly, LLCs are dissolved because the business is no longer profitable, it has fulfilled its purpose, the owners can't agree on important company decisions, or the owners want to retire or sell the business.
Involuntary Dissolution of an LLC in Alabama
Alabama Secretary of State has the power to dissolve any Alabama corporation or LLC if it doesn't maintain its good standing with the State. That entails filing annual reports, paying minimum business taxes, and adhering to all state regulations.
The Alabama Secretary of State can also dissolve an LLC if it's involved in illegal activities or if it doesn't follow the Alabama Business Corporation Act.
First, the Alabama Secretary of State will send a notice to the company's registered agent, which is usually the LLC's organizer or one of its members.
The notice will state that the company is dissolved and that it has 60 days to file a petition for reinstatement. If the company doesn't take any action, then it will be permanently dissolved.
An administratively dissolved LLC can face additional penalties if it carries on doing business after it's dissolved. That includes continuing to enter into contracts, borrowing money, or selling assets.
How Much Does It Cost to Dissolve an Alabama LLC?
The cost to file the Articles of Dissolution for an Alabama LLC is $100. Expedited dissolutions are available for an additional $50.
Keep in mind that the cost of dissolving an Alabama LLC can vary depending on the county in which the LLC is registered, especially if the LLC has any assets that need to be liquidated.
How Long Does It Take To Dissolve an Alabama LLC?
The formal date of dissolution for an Alabama LLC is the date on which Certificate of Dissolution is filed with the State.
It usually takes around fifteen days for the State to process the dissolution. Sometimes, it takes a bit longer to obtain the LLC's Certificate of Dissolution depending on the State'sState's backlog.
Can I Dissolve a Foreign LLC in Alabama?
Unlike a domestic Alabama LLC, foreign LLCs must file a Certificate of Authority to transact business in Alabama.
To dissolve a foreign LLC, you must first file a Certificate of Authority Cancellation with the State. Once this is filed, the LLC is no longer authorized to do business in Alabama and can begin the process of dissolving.
Do I Need to Obtain Tax Clearance Before Alabama LLC Dissolution?
No, tax clearance isn't mandatory in Alabama. However, your Alabama LLC should close its EIN account and pay any outstanding taxes prior to the dissolution because administrative fees and penalties can accrue.
Can You Sue a Dissolved LLC in Alabama?
Yes, but it isn't very easy. If the LLC was properly dissolved, then the members and managers are not personally liable for the debts of the LLC. However, you can still sue the LLC itself. Legal proceedings against a dissolved LLC are called "derivative actions."
To bring a derivative action in Alabama, you must first file a petition with the court. The petition must allege that the LLC's directors or managers breached their fiduciary duties to the LLC or its members. If the court approves your petition, then you will be allowed to proceed with your lawsuit.
How Do I Close My Alabama Sales Tax Account?
The Department of Revenue offers various ways to close your sales tax account. You can do this online, by mail, or in person. To close your sales tax account online, you'll need to log into the Department of Revenue's Online Services Portal.
Once you're logged in, go to the "My Alabama Taxes" page and select "Business Services." On the Business Services page, select "Sales Tax" and then "Close Sales Tax Account."
You will be asked to confirm that you want to close your account. Once you confirm, your account will be closed, and you will no longer be required to file sales tax returns in Alabama.
How to Close a Business in Alabama...
If you are considering dissolving an LLC in Alabama, it is crucial to seek help from a professional service provider.
By working with a law firm that has extensive experience in this area, you can be confident that all the necessary steps will be taken to ensure a smooth dissolution process.