The LLC dissolution process can be complicated, but it is important to understand the common dissolution steps involved and why it dissolves an LLC.
This article will provide a detailed explanation of each step involved in dissolving an LLC in Arizona. We will also highlight why business owners might choose to dissolve their LLCs, focusing on voluntary and involuntary dissolution.
If you are considering dissolving your Arizona limited liability company, make sure to read this article for all the information you need.
Steps to Dissolving an Arizona LLC
Before the Secretary of State approves LLC dissolution, the LLC owners must take several steps to complete the official paperwork and dissolve the company.
Step 1: Hold a Dissolution Meeting
LLC members must vote to dissolve the LLC. The dissolution vote must be unanimous unless your LLC operating agreement provides otherwise. You'll need a majority vote if that's what your operating agreement requires.
To hold the dissolution meeting, give each member written notice of the meeting date, time, and location at least ten days in advance. At the meeting, discuss the LLC dissolution and vote.
Step 2: Consult Your LLC Operating Agreement
Arizona LLC operating agreement should be consulted next. This document will have information on LLC dissolution procedures.
The operating agreement will also contain provisions about handling LLC assets. Review your LLC operating agreement carefully before taking further steps to dissolve your LLC.
Arizona law will apply if you don't have an Arizona LLC operating agreement.
Under Arizona law, the LLC will be dissolved if all LLC members unanimously agree to dissolve the LLC, a court orders the dissolution of the LLC, or the LLC's articles of organization state that the LLC will dissolve under certain circumstances.
Step 3: Notify Third Parties
LLC owners must let their creditors and lenders know about the planned dissolution before they officially dissolve the business entity. They should send an advance notice to these third parties to let them know of the impending dissolution and give them a chance to object to it.
It is only after all business debts, and obligations have been paid off or taken care of that an LLC can be dissolved and the remaining assets distributed among LLC members.
Step 4: Close Business Accounts
Before you dissolve an LLC in Arizona, you need to make sure that all business accounts are closed.
This includes any banking accounts, credit lines, or loans that are in the LLC's name. You will also need to cancel any business licenses or permits that have been issued to the LLC.
To close a business bank account, you will need to visit the bank in person and provide them with a copy of the LLC's Articles of Dissolution.
The bank will then close the account and send you a check for any remaining balance.
You should also notify the Arizona Department of Revenue that you are dissolving your LLC. You can do this by sending a written notice to the department. Be sure to include the business name, date of dissolution, and your legal information.
Step 5: Close Tax Accounts
Arizona LLC must pay all outstanding taxes before the dissolution. Although tax clearance is not necessary (only corporations and foreign LLCs need the Tax Clearance Certificate), it is recommended to close various tax accounts belonging to your LLC. Common taxes to close are Sales tax and Withholding taxes.
Contact the IRS and request a final return for your LLC. IRS Form 8832 is used for this purpose. You will need to file IRS Form 8832 if your LLC has elected to be taxed as a corporation. If your LLC has not elected to be taxed as a corporation, you may still need to file IRS Form 8832 if it has more than one owner.
Step 6: File Arizona Articles of Dissolution
LLC Articles of Dissolution (Articles of Termination) are filed with the Arizona Corporation Commission. The LLC Articles of Dissolution is a form needed to dissolve an LLC and are available on the Arizona Corporation Commission website.
The LLC Articles of Dissolution must include the name of the limited liability company, the formal date of filing, the effective date of dissolution, and the signatures of all members.
Arizona Corporation Commission charges a $35 filing fee for the Articles of Dissolution. The money is payable to Corporate Filings Section, 1300 W. Washington St.
Reasons to Dissolve an Arizona LLC
Every Arizona limited liability company must pay state fees, submit appropriate forms and pay minimum business taxes.
If the business entity fails to comply with the rules imposed by the Arizona Secretary of State, the state has the right to officially dissolve the company.
Delinquent fees can quickly add up, and it may become difficult for the business to operate without a valid license.
A court decree can also force the LLC to be involuntarily dissolved. This usually happens when the company is involved in a lawsuit and cannot pay damages.
On the other hand, voluntary dissolution happens when the business owners no longer want to conduct business. When the owners voluntarily dissolve the LLC, they do so by filing Articles of Dissolution with the Secretary of State. The LLC will be officially dissolved once the form is filed and accepted.
The reasons for voluntary dissolution are many, but some of the most common include:
- The LLC has fulfilled its business purpose
- The LLC is no longer profitable
- The owners can no longer agree on business decisions
- One of the owners wants to retire or leave the business.
If you find yourself in any of these situations, it's best to seek professional help to ensure that you dissolve your LLC correctly.
How Much Does It Cost to Dissolve an LLC in Arizona?
Arizona Corporation Commission charges a $35 filing fee for the Articles of Termination. Expedited processing is charged an additional $35, and this service shortens the processing period to just a few business days.
Additional costs for dissolving an LLC in Arizona may include professional fees for an attorney or accountant to prepare and file the necessary paperwork.
How Long Does It Take To Dissolve an LLC in Arizona?
Once you file Articles of Dissolution, the Corporate Filings Section takes around three weeks to process your application. Opting for expedited processing shortens the waiting period to just a few days, but it is charged additionally.
Can I Reinstate a Dissolved LLC in Arizona?
Yes, you can. The process is pretty simple. You'll need to file a Certificate of Reinstatement with the Arizona Corporation Commission and pay a $100 fee.
Once that's taken care of, your LLC will be back in good standing. Keep in mind that you can only do this within a 6-year timeframe. After that period expires, you will have to set up a new business entity.
How Do I Get a Tax Clearance Certificate in Arizona?
The Arizona Department of Revenue handles tax clearance certificates. The process is simple: you request the certificate and pay the required fee, which is currently $25.
The Department of Revenue will then provide you with a tax clearance certificate. Unlike foreign entities and corporations, LLCs don't need a tax clearance to dissolve.
How Do I Dissolve a Foreign LLC in Arizona?
To cancel your foreign LLC, you must file a Cancellation of Application for Registration (Form LL: 0009) with the Arizona Corporation Commission. You can find this form on the ACC website.
Foreign entities also need to follow the procedure otherwise required for domestic LLCs. That means closing all tax accounts and filing a final tax return if required. You should also send a notice to all creditors informing them of the dissolution and advising them of their right to file a claim against the LLC.
Dissolving an LLC in Arizona: Conclusion
If you are in the process of dissolving an LLC in Arizona, it is important to seek help from a professional service provider.
By working with a law firm with great legal experience and knowledge in this area, you can feel confident that all the necessary steps will be taken to complete the dissolution process smoothly and without any issues.