When a business owner in Colorado decides that it is time to close their business, the first step is to dissolve the LLC. This process can be complex, and there are specific steps that need to be followed in order to ensure that the dissolution goes smoothly.
In this article, we will provide a complete guide on how to dissolve an LLC in Colorado. We will explain the reasons for dissolution and provide detailed instructions for each step of the process.
Steps to Dissolving an LLC in Colorado
A Colorado limited liability company must perform certain steps to dissolve properly. The following is a guide on how to dissolve an LLC in Colorado.
Step 1: Notify All Members of the Dissolution
LLC members must be notified of the dissolution in order for it to be effective. This can be done by mailing an advance notice to each member, posting the notice in an appropriate location, or holding a dissolution meeting.
The dissolution vote must be unanimous, so it is important to ensure that all LLC members are on board with the decision. In some instances, the operating agreement may stipulate different voting procedures, so unanimous consent might not be necessary.
Step 2: Distribute Assets According to the Operating Agreement
Colorado LLC operating agreement should dictate the order in which members are paid out.
If you have an LLC with only one member, that member will receive all of the company's assets.
If there are multiple LLC members, the LLC would distribute LLC assets to members according to their ownership percentage or in the manner prescribed in the operating agreement.
Step 3: Notify LLC Creditors and Lenders
Colorado LLC dissolution process must include notifying LLC creditors, unknown claimants, and lenders of the company's impending closure.
Creditors are businesses or individuals to whom the LLC owes money, while lenders are financial institutions that have previously loaned the LLC money. You must notify both types of entities in writing, either by certified mail or by hand-delivery with a signed receipt.
You must settle all LLC obligations and business debts before distributing the remaining assets to the members. This typically means paying off all creditors and lenders. If the LLC has any assets remaining after all liabilities are paid, those assets must be distributed to the members in proportion to their ownership interests.
Step 4: Cancel All Business Licenses and Permits
LLC's dissolution also requires canceling all business licenses and permits. This can be done through the Colorado Secretary of State.
Depending on the license, you may have to notify the state or local municipality where your business is located.
Licenses and permits that may have to be canceled include professional licenses, trade licenses, fictitious business name registrations, and local tax permits and licenses.
Each license or permit will have specific instructions on how to cancel it. Be sure to follow all the steps to avoid any penalties or fines.
Step 5: Settle LLC Tax Obligations
Various tax accounts must be settled before the Colorado Secretary of State processes your Articles of Dissolution. This includes business income taxes, sales and use tax, and withholding tax.
If you have outstanding taxes, the state will not dissolve your LLC until you pay them. Additionally, the state may impose legal consequences and incur penalties and interest charges.
According to Colorado law, you are also responsible for filing a final return for your LLC. This is true even if the LLC has no activity during its last year of operation.
Step 6: File LLC Articles of Dissolution
A Colorado business can't terminate its legal existence unless it files Articles of Dissolution (called the Statement of Dissolution in Colorado).
The LLC dissolution form must contain the business name, LLC's principal office address (mailing address), registration number, the formal date of the dissolution, and all members' signatures.
You can get the form from the Colorado Secretary of State website. Once you've completed the form, please send it to the address listed on the form.
There is a $25 filing fee for Articles of Dissolution.
Reasons to Dissolve a Colorado LLC
The owners or the state can initiate the formal process of dissolving a business entity in Colorado. Voluntary dissolution occurs when the owners of a business entity file Articles of Dissolution with the Colorado Secretary of State.
The process is involuntary when the state files dissolution paperwork on behalf of the business entity because of statutory violations.
Voluntary Dissolution of a Colorado LLC
Usually, LLC owners decide to voluntarily dissolve their business entity because they want to retire, sell the business, or go their separate ways. Other most frequent reasons for LLC's dissolution are financial difficulties or disagreements between members.
All of the steps mentioned above are applicable to the voluntary dissolution of LLCs. It is essential to follow the dissolution rules, settle all tax liabilities and handle any administrative fees owed to the state. Without these steps, the dissolution process can be lengthy and complicated.
Involuntary Dissolution of a Colorado LLC
Colorado requires all LLCs to maintain their good standing with the state by fulfilling their fiscal obligations, paying recurring fees, submitting annual reports, and keeping their contact information updated. If an LLC fails to do any of these things, the state can involuntarily dissolve the business entity.
Involuntary dissolution is also known as administrative dissolution or revocation. It happens when the state terminates a business entity's existence because it failed to follow certain legal requirements, including court orders or tax obligations.
The process of involuntary dissolution can be complicated, so it's important to seek professional help if your LLC is facing this type of situation.
How Much Does It Cost to Dissolve an LLC in Colorado?
Once you fill in the appropriate form, you will be charged $25. However, you can choose expedited filing at an additional cost.
Keep in mind that the cost can vary depending on the minimum business taxes you owe, as well as the number of pages in your Articles of Dissolution. You should also keep in mind that the costs can be higher if you hire a professional to help you with the official paperwork and other necessary steps of the process.
How Long Does It Take To Dissolve an LLC in Colorado?
Online filing is usually processed within 24 hours, but it can take up to four weeks for the Secretary of State to process a paper filing. If you file online, make sure to choose an expedited service if you are in a rush. That will reduce the waiting period to three business days.
Can I Dissolve a Foreign LLC in Colorado?
Yes. You must submit the Statement of Foreign Entity Withdrawal and include the legal information, effective date of withdrawal, and the original Certificate of Good Standing from the state in which your LLC was formed.
You may submit these documents by mail or in person. This confirms that your foreign entity will no longer conduct business in the state.
Do Colorado LLCs Need Tax Clearance Before Dissolution?
The state approves LLCs to dissolve even if they don't obtain tax clearance. However, you should settle common taxes and close all tax accounts before you officially dissolve your LLC.
Can You Reinstate a Dissolved LLC in Colorado?
Yes. You can reinstate a dissolved LLC within one year of the dissolution date. To do so, you'll need to file a Certificate of Reinstatement with the Colorado Secretary of State's office.
Reinstating your LLC will not absolve you from any past tax liabilities. You'll still be responsible for paying any outstanding taxes, penalties, and interest.
How to Close a Business in Colorado...
If you are still unsure how to dissolve an LLC in Colorado, it is best to seek help from a professional. A professional service provider or lawyer with great legal experience can guide you through this difficult time and ensure that all the necessary steps are taken to properly dissolve your LLC in Colorado.