Tennessee LLCs are an excellent way for business owners to protect their assets from personal liability. However, when the time comes to dissolve an LLC in Tennessee, there are some steps that you need to take to terminate it and close out your company legally.
Tennessee LLC dissolution is a complicated process. While it may seem like a simple enough task to terminate an entity, there are actually many steps and requirements that must be met to dissolve a limited liability company in Tennessee legally.
This article discusses what Tennessee LLC dissolution entails and how business owners can go about dissolving their Tennessee LLC without any legal issues or repercussions.
First, let's start with why Tennessee LLC dissolution might be necessary for your company.
Reasons to dissolve a Tennessee LLC
A Tennessee limited liability company can be dissolved for several reasons, including:
- The company has not filed an annual report with the state for two consecutive years.
- The company's articles of organization have been revoked.
- The company's members have voted to dissolve it.
- A creditor has obtained a judgment against the company and started proceedings to collect.
There is a difference when the owners voluntarily dissolve an LLC and when the LLC is involuntarily dissolved by the state.
When an LLC is voluntarily dissolved, the members must file articles of dissolution with the state and wind up the company's affairs.
This includes paying off any business debts and distributing any remaining assets after LLC dissolution to the members.
When an LLC is involuntarily dissolved, the state has determined that the company can no longer operate in the state. The articles of organization are revoked, and all business assets must be liquidated by a court-appointed receiver or by someone designated in the articles of organization.
Voluntary Dissolution of a Tennessee LLC
When LLC members decide to dissolve a Tennessee LLC voluntarily, they must take several steps to complete the dissolution process. The first step is to notify all members of the decision and provide them with a copy of the dissolution resolution. Next, the LLC must file a Certificate of Dissolution with the Tennessee Secretary of State Division of Business Services. Finally, the LLC must pay off any outstanding debts and distribute assets according to its operating agreement.
The notice of dissolution has to contain the following information:
- The business name
- The effective date of dissolution
- A statement that the LLC members have voted to dissolve the LLC voluntarily
- A copy of the resolution to dissolve
After filing the Certificate of Dissolution and paying a $20 filing fee, the Tennessee Secretary of State Division of Business Services will send a notice of termination to all registered agents. The LLC is officially dissolved once the Secretary of State terminates its existence.
Involuntary Dissolution of a Tennessee LLC
Administrative dissolution, also known as involuntary dissolution of a Tennessee LLC, happens when the LLC is no longer in good standing with the state.
This can occur for several reasons, including:
- The company fails to file annual reports or pay taxes
- The company's articles of organization are not filed correctly
- A member files a lawsuit against the company and prevails
- The company goes out of business.
When this happens, the Tennessee Secretary of State or the Internal Revenue Service has the right to dissolve the LLC.
When you know your LLC is being administratively dissolved, the first step to take is to stop doing business until all issues are resolved with the state or IRS.
You should also contact an attorney immediately, as this situation can be pretty complicated and expensive if it goes unresolved for too long.
The Steps after the Tennessee LLC Dissolution
Sending the notice of dissolution and paying the required filing fees is only the first step in the process of dissolving your Tennessee business entity.
For your LLC to be formally dissolved, you have to handle the winding-up process consisting of taking care of the remaining LLC documents and paperwork, such as managing any remaining business debt, outstanding taxes and notifying the creditors about the dissolution.
Keep in mind that LLCs with accepted contributions have to file the Notice of Dissolution before proceeding with the remaining steps. LLCs that haven't accepted contributions can go straight to filing the Articles of Termination.
If LLCs in Tennessee no longer conduct business, they have to appoint a member or a lawyer to settle all known debts and liabilities of the LLC.
This is often done through a debt settlement process. To do this, they need to identify all business accounts, creditors, and their addresses, as well as the amount and type of each liability owed.
Once all liabilities have been identified, the business can then move forward with the formal process of LLC dissolution.
The company will create a plan that explains how it will settle all debts and liabilities owed by the business, as well as when these payments are due and any other conditions for settling each debt or liability (such as interest rates).
When this has been completed, they need to contact creditors and inform them about the plan. Creditors will then have to decide if they want to accept the proposed settlement or not. If they don't, the business can still move forward with the debt settlement process, but it might be more difficult and could result in a legal battle.
A Tennessee limited liability company is obligated to notify the Tennessee Department of Revenue (DOR) if it ceases doing business in the state. In most cases, you can close your LLC's account by calling the DOR and asking them to send you a tax clearance letter.
This letter is required before the Division of Business Services will accept your dissolution.
Closing an LLC's account with the DOR is relatively simple. All you need to do is call the DOR and let them know that you are closing your LLC's account.
They will then send you a tax clearance letter, which you will need to show to the Division of Business Services before they will finalize your dissolution.
There are two forms available to LLCs -LLC partnerships need to file IRS Form 1065 while an LLC taxed as a corporation files IRS Form 1120.
This is also the time to close all tax accounts with the Tennessee Department of Revenue.
Filing the Articles of Termination
The last step in dissolving your LLC in Tennessee is to file Articles of Termination with the State's Division of Business Services.
The Articles of Termination have to include the name of the LLC, as well as its mailing address and date of filing. They also need to include the reason for termination (which is, commonly, the fact that it has ceased doing business).
After you have filed your Articles of Termination with the Division of Business Services, they will issue a final certificate confirming dissolution.
How Do I Dissolve a Foreign LLC in Tennessee?
A domestic Tennessee LLC is dissolved while foreign LLCs are withdrawn.
To withdraw a foreign LLC that can no longer transact business in the state, you need to file the Application for Cancellation of Certificate of Authority (Form SS-4241) along with the required administrative fees.
Can I Revoke the Dissolution of an LLC in Tennessee?
You can but under one condition. The condition is that you have not filed the Articles of Termination with the State. If you meet the requirement, send a written revocation of dissolution to all LLC members and file it with the Tennessee Secretary of State. The revocation will take effect when it is filed.
Is a Final Tax Return Required after Dissolution?
Yes. You need to file the tax return for the year that you dissolved the LLC and send the required annual reports if there are any left behind.
Tennessee requires no specific form for the final tax return, but most likely, you will use different forms depending on the type of your entity.
Do I Need to File an Annual Report if I Close My Business?
No, you do not need to file an annual report if your business is closed. However, you may still be required to pay taxes and/or fees depending on the closure type.
Please get in touch with the Tennessee Secretary of State or your local county clerk's office for more information.
What Happens to Ein When LLC Is Dissolved?
Your EIN account can't cease to exist, but the EIN associated with your LLC will be retired. Any other entity can never again use that EIN because it will be linked to the records of your old LLC. The IRS will send you a letter confirming that the EIN has been retired.
You should keep this letter in the event you need to prove that your EIN has been withdrawn. If you don't receive this letter, contact the IRS and ask for confirmation that your EIN has been retired.
How Do I Close an Entity with the IRS?
The IRS account can be closed once you send the final tax return before terminating the LLC. When filing the tax return, make sure to check the box assigned for "final Form LLC" on the tax return. If you fail to file a final tax return, your entity will remain open with an IRS account.
The taxes that were withheld during the period for which no return was made are still owed by the company, and this liability is not released until it has been filed.
Can You Use a Business Name if It Has Been Dissolved?
It depends on the state. In Tennessee, if a business is dissolved, it can no longer use its name.
After the dissolution, the business must stop using its name and cannot sell any assets using that name. Other entities, however, can use the name but not before the LLC is officially terminated, i.e., not until Articles of Termination have been filed with the state.
If you are a Tennessee LLC and wish to dissolve your company, it is essential that you know the consequences of doing so.
There are many steps involved in this process, and if not done correctly, it can result in fines or penalties levied by state authorities.
The best way to make sure everything goes smoothly is for an experienced business law attorney to guide you through the process from start to finish and give you legal advice.